The Central Bank would have no problem accepting extra powers to supervise financial institutions, its Governor, Mr Maurice O'Connell, told the Dail Committee of Public Accounts. But he said he knew of no instance worldwide where a "one stop shop" on supervision was effective.
Mr O'Connell said there was a "gathering debate" about the establishment of a single supervisor for the sector, but it was not clear what the remit of this regulator might be.
"Should it embrace the insurance sector, for example? What would be its precise responsibilities to consumers? Would it be for consumers collectively or dedicated to the rights of individual consumers? These issues need to be clearly defined."
He said the Bank's statutory duty at present was clearly defined by law. As the prudential supervisor it was obliged to protect depositors' funds and the stability of the banking system as a whole.
He had no problem with the establishment of a single supervisor that would embrace insurance as well as other activities. There was merit in the idea in view of the fact that the traditional lines of demarcation between financial institutions were becoming more blurred.
But the debate was complicated by the issue of consumer protection and taxation.
"It seems there is an impetus for what I might term a one-stop shop on supervision of financial institutions that would embrace everything. I know of no instance worldwide where this kind of approach works. I believe that the inclusion of taxation is quite impractical."
Consumer protection had been discussed again and again in international forums and to his knowledge nobody had found the ideal solution.
"There is somewhere a crossover point where prudential supervision ends and consumer issues begin. I acknowledge that this is a grey area that needs clarification. The Central Bank would have no problem accepting responsibilities in this area."
Another complication of "fundamental importance" was the question of confidentiality. "I can understand the frustration among you that institutions such as ourselves and the Revenue are not exchanging information. I can assure you that I too get frustrated about this but I must operate within the legal framework.
"The law requires me to observe very strict rules of confidentiality. This is not just Irish law; it reflects the rules worldwide. No matter what new institutions you establish, no matter what new arrangements you introduce, this issue will not go away," he said.
Mr O'Connell said there would always be a need to set out clearly the statutory obligations of all the respective authorities in the financial services sector.
"If we change our laws to allow for publication of information, then we forfeit the co-operation of other regulatory authorities. That would be the end of effective regulation."
"Time and time again" the Central Bank had had to intervene, "quietly and effectively", to correct or avert problems in the financial sector, he said.
The sector was expanding with the total value of deposits, excluding interbank deposits, in banks and building societies in Ireland now about £60 billion.
Nearly one-third of this was held by non-resident companies and individuals, which was not unique for a trading nation of our size.
