It is, by any standards, a stinging critique. In her submission to the Competition Authority, which is examining competitiveness in the banking sector, the Director of Consumer Affairs, Ms Carmel Foley, has accused the industry of reaping vast profits while claiming to earn only a modest return.

It is also guilty, shes says, of tacitly discouraging customers from shopping around for the best deal, failing to pass on the full benefits of interest rate cuts to mortgage holders and levying heavy penalty charges on small businesses.

Her recommendations are equally hard hitting: Ms Foley is calling for powers to prosecute banks imposing charges above limits laid down by the Central Bank. She calls for banks to be forced to become more transparent about charges and interest rates, if necessary reworking their pricing structures so customers can more easily make comparisons. And she urges the establishment of a statutory code of conduct for institutions to replace the current voluntary code, backed with the threat of penalties, including heavy fines and "naming and shaming".

Ms Foley's robust analysis will dismay, although probably not surprise, the sector, which has increasingly found itself on the back-foot as the public, politicians and employers accuse it of exploiting the housing boom to amass unprecedented profits.

Of particular concern will be her clinical demolition of claims by the Irish Bankers' Federation (IBF), the industry lobby group, that profit levels among financial institutions in the Republic are not out of step with their international peers.

She accuses IBF of quoting selective figures in its study, which said Irish banks were the 11th most profitable among 23 countries surveyed. The data omitted two of the Republic's main clearing banks, Ulster Bank and National Irish Bank, while including the exceptional foreign dealing losses incurred by AIB through US subsidiary Allfirst.

Ms Foley, in her submission, says: "Ireland is at the very top or near the very top of any list setting out international bank profitability and not mid-table as... claimed by the Irish Bankers' Federation.

"The high levels of profitability enjoyed by banks in Ireland have been maintained right up to the present time, despite the downturn in the Irish economy."

Equally bruising is her assertion that banks are slow to pass on interest rate cuts to mortgage holders while swiftly relaying them to deposit account holders. The benefits of recent rate cuts by the European Central Bank (ECB) have not always reached lenders although savers always see their interest rates pushed down, sometimes by more than the ECB cuts.

The arrival of Bank of Scotland in 1999 prompted indigenous rivals to cut mortgage prices, essentially halving margins overnight, the director notes.

Serious barriers to entry are identified by Ms Foley. She expresses concern at the Republic's "fragmented and inefficient" clearing system, controlled by the major banking players, which effectively have it in their remit to set barriers for new entrants.

The banks should not be allowed hold such sway over their industry - such a situation would not be tolerated in other sectors of the economy, she says.

Numerous complaints about delays in the clearance system had been received by her office; it is clear its inadequacies are harming competitiveness. Ms Foley calls for the setting-up of a central and independent clearing regulator, along the lines of Britain's free-standing PAYCOM.

Her submission adds: "The establishment of such a regulatory body, preferably incorporating a single clearing house and a standard set of interchange fees, would constitute an important step in facilitating greater competition in the payments sector by making the market accessible and cost effective for potential new entrants and also by encouraging small institutions to provide payment systems."

She believes customers are reluctant to switch to institutions offering more competitive rates because of the time and expense inevitably involved. Charging to set up and close direct debits are a particular disincentive.

Ms Foley favours a code - backed with sanctions - along the lines of a banking code sponsored by the British Banker's Association, which binds banks to assist customers who wish to move accounts.

Irish banks' reluctance to innovate pointed to an absence of meaningful competition, adds Ms Foley. The Republic was among the last EU states to introduce debit cards - when one was finally introduced it was incompatible with its UK equivalent, although this would arguably have benefited customers.

"Desire to maintain control and ownership was the prime driver for banks, not introducing innovations that would link up with schemes already operating in Britain," she says.

A paucity of ATM services is also highlighted in the submission. The number per capita in the Republic was 55 per cent of the EU average in 2000, down from 65 per cent in 1986.

A lack of transparency makes it difficult for customers to compare fees charged by different institutions, according to Ms Foley.

With more submissions expected before the Competition Authority issues its recommendations, choppy waters lie ahead for the Irish banking industry.