Members of the Government advisory group on the establishment of a single financial regulator meet today, hoping to agree on the shape of the new regime they will recommend.

It is understood that the group has to decide between two scenarios. The first would involve the appointment of a wholly separate financial regulating body, having only the minimum necessary relationship with the Central Bank because it is the lender of last resort.

The second option is a reconstituted Central Bank, wherein it would be divided into two separate agencies, one acting as the new regulator, the other carrying out the bank's other duties.

Another possibility, which is not thought to be a serious option, would involve the regulatory functions being taken on by the Central Bank as it now exists.

The committee, chaired by Mr Michael McDowell SC, is to report to the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, and the Minister for Finance, Mr McCreevy, by the end of this month. The committee was originally to have reported by the end of February.

It is understood that the representative from the Department of Enterprise, Trade and Employment and the Director of Consumer Affairs, Ms Carmel Foley, are both in favour of a regulator completely independent of the Central Bank. However, other members of the group have expressed reservations about this approach.

The Governor of the Central Bank, Mr Maurice O'Connell, has said the separation of the functions of supervision and responsibility for the stability of the banking system is not an issue to be treated lightly.

MSF, the union representing staff at the Central Bank, has come out against the idea that the regulator should be independent of the bank. It has urged that a subsidiary of the bank - with consumer representation - be considered instead.

Members of the Association of Higher Civil and Public Servants (AHCPS) from the Department of Enterprise, Trade and Employment have put a motion down for the association's annual general meeting on May 8th, calling for a new "greenfield" structure to be created. The motion also calls on the Government to ensure that "all management and staff of the new proposed structure should combine on the basis of equality and `parity of esteem' ". Staff in the Department currently have responsibility for the regulation of the insurance industry, and it is likely that the new body will be made up of staff from that division and from the Central Bank. The motion also calls on the Government to "take account of the particular sensitivities within the financial services market as regards remuneration".

The general secretary of the AHCPS, Mr Sean O Riordan, said one option would be to locate the new regulator within the civil service. The nature of the service to be provided is "at the heart of what the civil service does, and does well". A regulating body staffed by persons who came from the sectors to be regulated would be less well able to perform its function, he said.