John Perry (Sligo-North Leitrim, Fine Gael) | Oireachtas source

I thank Deputies Browne and Mattie McGrath for raising this issue. All of the financial institutions in Ireland have benefitted from the support provided by the Irish taxpayer. Even if they have not been directly recapitalised, they benefit from the stability that Government guarantees and recapitalisation have provided to the Irish financial system. In return, the Irish taxpayer has a legitimate expectation of being treated in a fair and equitable manner by the financial institutions. This legitimate expectation is underpinned by the code of conduct for business lending to small and medium enterprises, SMEs, that ensures banks live up to their obligations in dealing specifically with SMEs.

The code of conduct was issued by the Central Bank under section 117 of the Central Bank Act 1989 and became effective from 1 January this year. The code of conduct is part of a suite of measures that the Government has undertaken to support the vital SME sector. The Government's commitment to the sector was underlined by the measures announced in yesterday's budget, which included a ten-point tax reform plan to help small businesses, increased resources for the Credit Review Office and the development of a suite of investment funds in the SME sector by the National Pensions Reserve Fund Commission. It is gratifying that these measures were welcomed by the business representative organisations.

The code of conduct replaced the 2009 code and strengthened the protections available to SMEs in financial difficulties. The banks are required to comply with it as a matter of law. The code makes it clear that anybody acting for a bank is subject to the code and banks cannot avoid their obligations by getting an agent to act on their behalf. The Central Bank can invoke its statutory powers to require compliance with the code and a breach of the code is a breach of a regulatory requirement and may be the subject of enforcement action. The code imposes a number of requirements on security, including that the bank must not impose unreasonable collateral requirements, it must not impose unreasonable personal guarantee requirements on borrowers and it must explain clearly the possible implications for the guarantor of giving collateral or a personal guarantee. Any enforcement of a personal guarantee over a principal private residence must be in accordance with the code of conduct on mortgage arrears.

I should say that the provisions of the code are without prejudice to a bank's legal rights to enforce any agreement, including any security taken in connection with any agreement. If a borrower has pledged security to a bank as part of a loan agreement and has failed to make the repayments, the bank has the right to take the security. I am aware of media reports of an incident in Wexford in which it is alleged that the agents of the bank broke the law in attempting repossession of a vehicle. I understand that the Garda Síochána is investigating the incident. If any breach of the law is revealed in the investigation, I would fully expect the Director of Public Prosecutions to prosecute those involved.

The Central Bank has a number of options at its disposal if there was a breach of the code of conduct. The matter has been brought to the attention of the bank and I expect it will examine the case in detail. That said, the Central Bank is a separate entity from the Department of Finance and operates independently from the Department. The code of conduct is due for a full review next year and any gaps in the code will be fully addressed in that review. I wish to make it absolutely clear that I do not condone any actions in breach of the law and I call on the parties to this dispute to make every effort to resolve it in a mutually acceptable manner.

See this speech in context