Written answers

Thursday, 26 March 2009

Department of Finance

Banking Sector Regulation

4:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 46: To ask the Minister for Finance when it is expected that traditional banking practices will be re-established; if this is expected to encompass traditional lending criteria in respect of mortgages or other uses; if it is intended to take steps to ensure that greater emphasis is placed on lending for employment creation purposes; if his attention has been drawn to the fact that the banking system does not appear to meet the ongoing needs of trade and commerce in the current climate; if it is intended to issue directives to the banking sector with a view to achieving a particular focus on the productive areas of the economy; and if he will make a statement on the matter. [12452/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The primary objective of the Government is to secure and maintain the financial and economic position of the State. Significant steps have been taken to achieve that objective including the Bank Guarantee Scheme and the recapitalisation of Ireland's two main banks. An essential element of the recapitalisation scheme, which I expect to be implemented in the very near future, anticipates the banks involved increasing the level of credit available throughout the economy. As part of the recapitalisation measures, the recapitalised banks have committed to increase lending capacity to small and medium enterprises (SMEs) by 10% and to provide an additional 30% capacity for lending to first time buyers in 2009. If the mortgage lending is not taken up, then the extra capacity will be available to SMEs. Compliance with this commitment will be monitored by the Financial Regulator. An independent review of credit availability, funded by the banks but managed jointly by the banks, Government and business representatives is also underway and will be completed shortly. Amongst the issues covered by this review will be changes in bank lending, repayment terms and a comparison with customer experiences prior to the onset of the financial crisis. I am satisfied that this review, along with the quarterly reports from the recapitalised institutions, will give a clear picture regarding the flow of credit in the Irish economy.

The Financial Regulator has also worked closely with my Department to introduce two new codes. The code of conduct for business lending applies to all regulated banks and building societies and will facilitate access to credit, promote fairness and transparency and ensure that banks will assist borrowers in meeting their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner. The second code covers mortgage arrears and is designed to ensure that mortgage lenders take action to assist householders who are in arrears and will apply to all mortgage lenders, including banks, building societies and retail credit firms.

The question of issuing specific directives to the banks does not arise at this point in time. I fully expect that the banks concerned will meet their commitments under the recapitalisation scheme to increase the level of credit available nationally. Compliance with those commitments will be monitored by the Financial Regulator, the independent review of credit availability referred to above and by the State's appointees on the recapitalised banks.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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Question 47: To ask the Minister for Finance if he has data available to him on the trends in business credit since the bank guarantee in September 2008 and on the work of the clearing group on blocked credit; and if he will make a statement on the matter. [12525/09]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Government Departments and State agencies have engaged with banks and business representatives in a variety of settings on issues surrounding the flow of credit for business. A formal structure for those contacts on an ongoing basis will be finalised shortly.

An independent review of credit availability, funded by the banks but managed jointly by the banks, Government and business representatives is also underway and will be completed shortly. Amongst the issues covered by this review will be changes in bank lending, repayment terms and a comparison with customer experiences prior to the onset of the financial crisis. I am satisfied that this review, along with the quarterly reports from the recapitalised institutions, will give a clear picture regarding the flow of credit in the Irish economy.

As part of the recapitalisation package announced on 11 February, Allied Irish Bank and Bank of Ireland reconfirmed their December commitment to increase lending capacity to small and medium enterprises (SMEs) by 10% and to provide an additional 30% capacity for lending to first time buyers in 2009. If the mortgage lending is not taken up, then the extra capacity will be available to SMEs. AIB and Bank of Ireland have 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 will be monitored by the Financial Regulator. The banks will make quarterly reports, with the first report to end March 2009 to be submitted by end April 2009. Both institutions have met with officials from my Department to give details of the steps they are taking to implement these measures.

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