The chimera presented yesterday by the Minister for Finance and the Tanaiste is easier to understand in terms of what it is not rather than what it is. The organisation outlined is not the "entirely new independent organisation" recommended by the Single Regulatory Authority Implementation Advisory Group in May 1999.
Instead it will be a body with considerable autonomy, but with strong links to a reorganised Central Bank, which is to become the Central Bank of Ireland and Financial Services Authority (CBIFSA). As the name suggests, the re-organised Bank will discharge the responsibilities of a central bank and a financial regulator through two autonomous subsidiaries.
The current governor of the Central Bank will become governor of the body and will have the casting vote on its 12member board, comprising six representatives from each subsidiary.
The Irish Monetary Authority (IMA) will take over the Bank's monetary policy functions, which in essence will act as the Irish arm of the European Central Bank. The Irish Financial Services Regulatory Authority will take over the Bank's prudential role - the supervision of the financial health of Irish banks. It will also take over the regulation of the insurance industry and other non bank financial services from the Department of Enterprise and Employment. Its third responsibility will be the consumer protection functions of the Director of Consumer Affairs regarding financial services.
The regulatory authority will have its own 10-member board with an independent chairman. The board will include the chief executive of the body and its customer services director. The remainder will be drawn from the social partners and people with appropriate expertise. It will be directly accountable to the Minister for Finance.
The authority will have considerable scope to take regulatory action independent of the CBIFSA and IMA, but must take their views into account in certain circumstances. For example, if the it decided to close down a bank it would have to consult the umbrella body and the IMA because its actions would have implications for monetary policy.
The requirement for the regulatory body to act in harmony with the rest of the CBIFSA is seen as a significant concession to the Central Bank - or the IMA as it will become - as it gives it a say in significant regulatory actions.
The influence of the Central Bank in the new set-up is copperfastened by arrangement under which the IMA governor is the head of the umbrella body. This was unavoidable, according to officials, because under EU law as the representative of the European Central Bank - the head of the IMA in the new set-up - cannot be accountable to any national body.
The new organisation is cumbersome, but will have teeth and should benefit consumers. It will be able to conduct investigations and take the ultimate sanction against a financial services company of revoking its licence.
The Government is also to establish a Financial Services Ombudsman to arbitrate on disputes between the finance services companies and their customers. It will replace the credit institution and insurance industry ombudsmen who are funded by the banks and insurance firms.