Seán Connick (Wexford, Fianna Fail)

I thank Deputy Creighton for raising this matter on the Adjournment. I am taking this matter on behalf of the Minister for Finance.

I welcome the opportunity to debate the performance of the Credit Review Office. The office was established under the NAMA legislation and has had an important effect on the availability of credit to SMEs. The office reviews decisions by AIB and Bank of Ireland to refuse credit as well as decisions to reduce or withdraw existing credit and constructive refusals where decisions are not given within the time limit or are unreasonably priced or subject to unreasonable terms or conditions. Mr. Trethowan has submitted two quarterly reports, which have both been published. I must point out that the office is funded by the two banks and not by the taxpayer.

Mr. Trethowan has completed 22 reviews since the office was established. He agreed with the bank in 14 of them, sided with the borrower in five cases, and considered that more work was required by both the borrower and the bank in three other cases. Twelve additional applications are proceeding through the process, with three others awaiting clarification of eligibility. In all the cases in which the office sided with the borrowers, the banks have co-operated when the CRO asked them to reconsider their decisions.

The numbers involved are quite low compared with the noises made by business representative organisations about the availability of credit. I strongly urge anyone who considers he or she has been unfairly refused credit to seek an internal review of the refusal followed by a review by the CRO if necessary. It is only through this process that reliable figures for unfair refusals can be established. Mr. Trethowan has made it clear in his reports that all of the review cases to date have been difficult lending decisions and that there is no evidence that the banks are indiscriminately refusing credit.

Another positive effect of the CRO has been Mr. Trethowan's work with the two banks to put their internal appeal mechanisms on a more formal footing. The latest figures show that the banks have completed a total of 106 internal appeals, of which 20 resulted in refusals being overturned or sanctioned with conditions, and a further eight appeals are in progress. I must also point out that Ulster Bank, which is not participating in NAMA, has established its own internal review process based on the principles of the CRO. Indeed, the existence of the CRO and the right to both internal review and review by the office appears to be having an effect on credit decisions at local level. Anecdotally, we are becoming aware of cases in which credit has been granted when the issue of review was raised, and the CRO has been able to secure credit in some cases without the need for a formal review.

Some borrowers and representative organisations have raised fears that seeking reviews will damage their relationships with the banks. This is a real fear, and the Department has written to each bank about this. As Mr. Trethowan's report makes clear, both banks have shown a positive attitude to the process at senior level. Another task performed by the CRO was to review the plans of the two banks to reach the target of €3 billion in lending this year and next year. The plans contained commercially sensitive information but were published in a redacted format. They are considered to be credible, and Mr. Trethowan is satisfied with the banks' performance to date on them. It is particularly important that the banks' adherence to marketing and staff development plans to support lending can be assessed if the actual amount lent turns out to be lower than the target.

Banks have experienced pricing increases in their retail deposit and long-term market funding costs, which are now being passed through to borrowers when their facilities are reviewed. Mr. Trethowan has asked both banks to try to minimise the impact of these increases where possible - for example, by increasing the length of the loan to spread the cost. One bank is offering an option to some borrowers to renew for one year or five years to allow borrowers to avail of better rates for shorter term borrowing.

The CRO has been a positive influence on the availability of credit to the SME sector, and I appreciate the efforts of Mr. Trethowan and his team in the office.

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