Compromise proposals on the controversial establishment of a single financial regulator are to be brought to Cabinet by the Tanaiste and the Minister for Finance within a few weeks.

The new regulator will have extensive statutory powers and will be independent of the Central Bank, which will retain its existing responsibility for the prudential supervision of financial institutions.

But in a key compromise, an overarching body will straddle the new regulator and the Central Bank, with both reporting to the governor of the Central Bank.

The structure will be similar to that of Forfas, the umbrella body charged with developing industrial policy, under the aegis of which the IDA and Forbairt operate independently. The final details for the new legislation are still being worked out. The move should simplify the disparate nature of current regulation, where various bodies are responsible for consumers, insurance brokers, banks and credit unions.

The issue had been stalled for almost two years following the publication of a report on the issue by a committee chaired by the Attorney General, Mr Michael McDowell.

That recommended taking regulation out of the Central Bank and setting up a separate regulatory organisation. The Department of Finance was opposed to this, arguing that the Central Bank ought to hold onto all powers and be given additional duties in relation to protecting consumers.

Legislation is also expected on a range of new measures suggested in the McDowell report, under the Financial Services Miscellaneous Provisions Bill. The proposals were outlined by Department of Finance officials at a PAC meeting in November. Mr McCreevy met the Taoiseach to discuss these issues last December.

The measures range from ethics, corporate governance and codes of conduct for banks. Other areas involve specific duties for chief executives in terms of tax compliance and the setting up of consultative panels.

However, without agreement on the new regulator, these measures could have been seen as giving additional powers through the back door to the Central Bank.