Most consumers have lost significant amounts of money because of the inadequacies of the current financial regulatory structure, according to a consumer panel appointed by the Minister for Finance.
In a damning report issued today, the Financial Services Consultative Consumer Panel said that the current downturn in Ireland was magnified by the Financial Regulator's failure to control the property market bubble.
“We are unclear as to why the Regulator did not move to dampen the bubble at an earlier stage, for instance by requiring banks to set aside more capital for riskier products,” the report said.
Any wrongdoing by the Financial Regulator should be investigated by an external authority, it advised.
“There must be a willingness on the part of the Financial Regulator to tackle large market participants as vigorously as they deal with smaller participants,” the report continued. It also recommended that there should be a consumer expert on the boards of both the Financial Regulator and the Central Bank.
In addition, senior staff should be recruited from a wider pool – including the private sector - than in the past in order to ensure the independence of the Regulator and “limit political meddling” with its work.
The next chief executive of the Financial Regulator should be a person with a strong track record of "independent thinking" and "facing down vested interests". In January, chief executive Pat Neary retired early over the handling of the Regulator's investigation into the €87 million in secret directors' loans at Anglo Irish Bank.
Responding to the report, the Regulator said: "At present we are actively engaged in intensifying and reorganising our approach to regulation.
"It has been acknowledged by the Consumer Panel in its report of September 2008 that the consumer directorate has worked well for consumers and we agree it is crucial the level of consumer protection that has been established is maintained and further developed as part of the new regulatory regime."
The Consumer Panel consists of consumer advocates, activists, industry experts, and members of the banking, academic and media communities, and is responsible for monitoring the performance of Financial Regulator.