Confusion about where customers should take their complaints about financial institutions and fudge about how issues are dealt with should be removed by the creation of the new Irish Financial Service Regulatory Authority (IFSRA).

But the real test of the new authority will be how quickly and effectively it asserts its independence in dealing with the powerful financial institutions it will monitor. The appointment of a strong and clearly independent board will be the first step in establishing credibility for the new regulator.

While some of the staff in the new institution will come from the existing Central Bank - they will bring technical expertise and experience that would not be easily found in the marketplace - it will be important that the IFSRA chief executive and customer protection director are recruited externally. The new regulatory structure for the financial services sector involves the creation of a new body - the Central Bank of Ireland and Financial Services Authority (CBIFSA). The CBIFSA will have two "pillars" - the IFSRA and the Irish Monetary Authority (IMA).

The IMA will take over the existing monetary policy functions of the Central Bank. The IFRSA will take over the Central Bank's prudential role supervising the solvency of the financial institutions and will regulate the providers of financial services to consumers.

The board of the CBIFSA - made up of equal numbers from the IFSRA and the IMA, and chaired by the current governor of the Central Bank, Mr Maurice O'Connell - will "co-ordinate the activities of both authorities". Only time will tell whether the effectiveness of the IFSRA as a regulator will be compromised by possible conflicts of interest between it and the IMA. For example, where proposed actions by the IFRSA are seen by either the IMA or the CBIFSA as threatening the stability of the financial system, such as revoking the licence of one of the big banks. With its own board setting its policies and reporting directly to the Minister for Finance, the IFSRA has the potential to provide a good service to the customers of financial institutions whose avenue of complaint has been limited. The IFSRA will take over regulation of the banks, building societies, credit unions, life assurance and general insurance companies, investment and insurance brokers, and investment managers. It will take responsibility for issues under the Consumer Credit Act concerning financial institutions from the Office of the Director of Consumer Affairs.

Reorganisation of regulation in the sector is long overdue. Currently, the banks and building societies are regulated by the Central Bank, the credit unions by the Registrar of Friendly Societies, and the insurance companies and investment brokers by the Department of Enterprise and Employment.

The announcement of a new independent Financial Services Ombudsman is to be welcomed as another level of protection for consumers.