The Central Bank Reform Bill 2010 was published today. This Bill merges the functions of the Central Bank and Financial Regulator and creates a single, fully-integrated Central Bank with a unitary Board. The Board will be known as the "the Central Bank Commission". It will be responsible for the prudential supervision of regulated financial service providers, the conduct of business, including protection of consumer interests, and the stability of the financial system overall. Most of the existing functions of IFSRA will be merged into this new structure. (Under the Bill the IFSRA is dissolved).

This merger of Central Bank and Financial Regulator powers is designed to address concerns that a lack of a coherent approach to monitoring systemic risks at a macro level was a key contributing factor to market failures.

Under the Bill the positions of Head of Central Banking and Head of Financial Regulation are placed on a statutory footing. The Central Bank Commission may have input into "sensitive or influential" appointments in regulated financial service providers, including the power to direct that a person should not be appointed to perform a controlled function where it is satisfied that the person is not a fit and proper person to perform that function.

The Consumer Protection Act 1995 will be amended to take account of the dissolution of IFSRA and the creation of the new unitary structure, and to provide for the transfer of certain functions formerly performed by the Consumer Director of IFSRA to the National Consumer Agency. Amendments are also made to insurance legislation so as to enhance compliance by the insurance sector.

While this is mainly a framework piece of legislation there is a sense underpinning some of the provisions that the approach to regulation and compliance will under this new structure be quite deep. For example, there is a power to prescribe certain functions of regulated entities as "controlled functions" and only persons who pass the relevant fitness and probity requirements may carry out these functions going forward. In addition, there are specific powers to investigate how these controlled functions are being carried out. The powers of the Head of Financial Regulation to issue suspension and prohibition notices are also enhanced.