The Government could amend legislation to allow the Minister to dismiss the governor of the Central Bank, according to the current governor, Mr Maurice O'Connell. This would be preferable to moving regulation away from the bank to a new institution, he said.,

Speaking yesterday, Mr O'Connell said there is no reason why he cannot be dismissed by the Minister without full board approval, if that was what the Government wished.

He would have to maintain his complete independent on monetary policy which is required under EU law. However, he insisted that his position is no different to other heads of state bodies, who can also only be dismissed after a unanimous decision of the board.

The recent report on the setting up of a single financial regulator, argues that the lack of accountability of the Central Bank is a dominant reason for setting up a new regulator, independent of the bank. But according to Mr O'Connell, the report is deeply flawed on this issue. He also insisted that prudential regulation is the first line of defence for the consumer.

"EU law is not as consumer friendly as it might be for banks. It is due for revision but we have to work within that."

He added that the Bank wants a balanced debate and recognition that regulation is currently working well. The governor also pointed out that eight out of 11 euro central banks are the lead regulator in their own country. However, none has overall control of prudential and consumer issues.

He added that there is little appreciation of what prudential regulation is about, so all the discussion is about the consumer. But does that warrant meddling with prudential regulation, he asked?

The Government is to consider in the weeks ahead a report of an advisory group on the issue, chaired by Mr Michael McDowell. The majority recommended a new regulator, while the Department of Finance and Central Bank representatives said control should remain with the bank.

Mr O'Connell said the Bank would be very happy to accept a third, middle position, outlined briefly in the report by the representative of the Department of the Taoiseach. This would involve two completely separate, parallel, structures in the Central Bank. One - in charge of regulation - would have a chief executive, who could be dismissed by the Minister, while the other would be headed by the governor who would not have any operational or strategic role in regulation.

"The main point is that we have to have somebody who is in charge," he said.

The Bank's head of supervision Mr Liam O'Reilly admitted that the Bank could see "gaps" and that a job needs to be done on consumer regulation. "Any job which has been given to us we always felt was done competently and well."

The Bank officials also pointed out that an advantage of keeping consumer regulation separate from prudential is that it can then be more open and provide more information.