Brian Lenihan Jnr (Dublin West, Fianna Fail)

Deputy O'Donnell will be aware that under the NAMA legislation I will issue guidelines to ensure that small and medium-sized enterprises, sole traders and farm enterprises, will have recourse to an independent, external review of decisions of credit refusal by the NAMA-participating banks. I hope banks not participating in NAMA or covered by the Government guarantee will also decide to join the system. My aim is to have a simple, effective review process, run by persons with experience and credibility. The banks must comply with the recommendations of the review process, or explain their reason for not doing so.

In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all.

Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that reviews will commence shortly. While it is preferable that the banks raise capital themselves, without State involvement, I am on record as saying that if further capital injections from the State into the banking sector are required, the Government is willing to act. In the case of AIB or Bank of Ireland these capital injections would be in the form of equity capital, which would have the effect of increasing State ownership and control.

I ask the Deputy to recall that the recapitalisation of AIB and Bank of Ireland imposed a range of requirements on the two banks, including important commitments to support business lending. As part of the recapitalisation package announced in February 2009, both AIB and Bank of Ireland confirmed their commitment to increase lending capacity to small and medium enterprises by 10% and to provide an additional 30% capacity for lending to first-time buyers in 2009. If the mortgage lending was not taken up, then the extra capacity would be made available to SMEs. AIB and Bank of Ireland also committed to public campaigns to actively promote small business lending at competitive rates with increased transparency on the criteria to be met. Compliance with this commitment is monitored by the Financial Regulator and quarterly reports are submitted by both banks.

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