Mr. Richie Boucher:

Roughly €2 billion is drawn at any one moment in time. We have seasonal facilities, stocking facilities and invoice discounting. Overdraft facilities are an element of that and some of it is term loans. Utilisation will reflect that. We do not make money unless the money is utilised. We only earn the income as the money is utilised, so utilisation is the key criteria that we look at. Increased usage of invoice discounting means to us that our customers are slowly recovering. They are selling more product and therefore have a greater utilisation factor to finance against debtors.

With regard to the Credit Review Office, CRO, we had 70 cases in which a decision was overturned by the CRO. The funds were advanced in 37 of those cases. It is important to bear in mind that in 30% of the cases in which funds were advanced after a credit decision by Bank of Ireland was overturned, those customers have subsequently defaulted. My point is that lending to SMEs is not an exact science. One is making judgments and using opinions the whole time. We will get it wrong. We assess a significant number of credits every day. We have a desire to approve the credit on the basis that it is safe for us, but we get it wrong. We will lend money to people today who will default in a year’s time and we will decline some customers who might have been able to repay us. It is not an exact science. If we just use the example of the Credit Review Office, it has independently looked at the credit and it has asked us to look again at certain customers, and one third of those customers have defaulted. That is the risk we take. We are in the risk business. We try to accept risk but we will not always get it right. We work the whole time to try to.

Deputy Tóibín asked about lending. One of the biggest issues for us in lending to SMEs is the character judgment one is making about the entrepreneur and the ability to predict future cashflow. Lending is all about the ability to predict future cashflow. We are not glorified pawnbrokers who just lend against security. One of the things on which we have worked hard and provided intensive staff training is a better ability to ask the right questions and support customers in the assessment of future cashflow. We stress the future cashflow and spend as much time on the assumptions and what would happen if it was correct or incorrect, and what is the sensitivity of the future cashflow to future predictions. That is the hardest part of SME lending. It is anticipating what might happen in the future and whether we can make an appropriate credit decision against that.

Deputy Tóibín also asked about our statistics. We are a public company so we must verify every statistic that we mention as part of a presentation to the committee or talk about to our investors because those are statements to the market on which investors are making decisions. When we say that 85% of the SME loans that come to us are approved, that is a verifiable statistic. It is something we share with the Department of Finance and the Central Bank and we give quite a lot of detail around that.

With regard to personal guarantees, we are clear that is an issue. Again, the bank’s desire is to lend money. We do not make money until we lend the money. Our job is to make money to generate revenue. A customer will decide what corporate structure he or she wants to carry on the business through. Some people will say for tax or other reasons that they want to borrow in their sole names and therefore the loan is with full recourse. Other people will want to go through a limited liability company and again they will want to make decisions which will be based on that. We do not provide 100% finance willingly. I have to be absolutely clear on that. Sometimes we end up doing it by mistake but our view is that there must be equity in a transaction that de-risks the transaction from the customer’s point of view and the point of view of the bank. If someone decides to go through a limited liability company the choice to the customer is whether they put equity in the form of cash into the limited liability company as share capital. Some customers decide not to do that.

They decide they want to keep their assets outside the company and we say that if we are to provide a loan on a basis that we can accept the risk then that equity contribution must be recognised by way of a personal guarantee. It is not something that we look for as a matter of rote, it is an assessment of the relevant level of the equity that goes into the company.

Mr. McLoughlin might want to take the question on bank charges.