The Consumers' Association of Ireland has warned that consumer protection must be as important as prudential supervision of banks once a system of regulation o f financial institutions is introduced.

The Cabinet is likely to approve legislation for a single financial regulator this week following a joint memorandum from the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy.

The memorandum will propose setting up the new regulator which will be a combination of the Central Bank as a monetary authority on one side and a new independent strong financial regulator on the other. Both will operate under the auspices of an overarching body which will be controlled by a board including consumer interests and the governor of the Central Bank. But precise reporting structures are not yet agreed.

The structure may be similar to Forfas, the umbrella body charged with developing industrial policy, under the aegis of which the IDA and Forbairt operate independently.

Mr Eddie Hobbs, finance spokesman for the Consumers' Association, said it was concerned that the prudential aspect of making sure banks stayed solvent should not have precedence over consumer protection under the new structure.

Ms Harney believes consumer protection is crucial and any proposal should adequately cater for consumer concerns and ensure consumer interests are fully protected.