Brian Lenihan Jnr (Dublin West, Fianna Fail)

Data on business credit are available to me from a number of sources including the Central Bank and the Financial Regulator. Returns are also made by institutions covered under the guarantee scheme. From the available reports it is clear there has been some reduction in business credit. The most recent Central Bank monthly statistics show a reduction in total credit outstanding from non-financial corporate bodies of €1.3 billion in March 2009, compared with February 2009.

However, the cause of the reduction in business credit is not clear. Some reports state that customers with viable business propositions are being refused credit, while other reports suggest that falling demand for credit is the main cause of reduced credit flow. It is important that there should be a clear understanding of the basis for the slow down in business lending so that policies can be targeted to ensure that necessary corrective actions are taken, as required. The Government therefore decided, when it announced the recapitalisation of the banks in February, that there should be an independent review of bank lending.

As part of the recapitalisation package, Bank of Ireland and AIB agreed to fund an independent review on credit availability to SMEs in Ireland. The review is supervised by a steering committee consisting of representatives from the banks, the business sector and the public sector. Consultants have been appointed and have commenced their work. I expect that the result of the review will provide a clear picture of credit demand and credit availability to businesses and will identify ways to improve the flow of credit. The report on the review is expected at the end of June.

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