Seán Ó Fearghaíl (Kildare South, Fianna Fail)
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Question 151: To ask the Minister for Finance if he will consider correspondence (details supplied); and if he will make a statement on the matter. [11192/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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A core Government objective is to free up lending on a commercial basis into the economy, particularly to the small business sector, to support economic growth and a number of actions have been taken to achieve this objective. In the context of the bank guarantee scheme and recapitalisation the banks have made important commitments to support business lending, while the Government has taken a number of steps to help ensure the flow of credit.

An independent review of credit availability was agreed in the context of the recapitalisation of AIB and Bank of Ireland. The purpose of the review was to ascertain the position on credit availability to SMEs in Ireland. The Steering Group for the review consisted of representatives of the Departments of Finance and Enterprise, Trade and Employment, Forfás, Enterprise Ireland, the Irish Banking Federation and the six main banks involved in lending to SMEs, business representatives from ISME, Chambers Ireland and Small Firms Association. The final report of the Review of Lending to SMEs is available on my Department's website.

The report made a series of recommendations including the further development of a framework for monitoring credit availability and measures to improve communications between the banks and SMEs. The report also suggests consideration of specific supports to ease the working capital requirements of SMEs, and measures to help investment levels in SMEs. A follow-up independent review of credit availability was published in December. Both reviews are available on my Department's website at www.finance.gov.ie.

Furthermore, a Code of Conduct for Business Lending to Small and Medium Enterprises took effect last March. This code applies to all regulated banks and building societies and facilitates access to credit, promotes fairness and transparency and ensures that banks will assist borrowers in meeting their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner. The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulty the banks will give the customer reasonable time and seek to agree an approach to resolve problems and to provide appropriate advice. This is a statutory code and banks will be required to demonstrate compliance.

In addition, as part of the recapitalisation package announced in February 2009, Allied Irish Bank and Bank of Ireland reconfirmed their 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 was not taken up, then the extra capacity would be made 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 is being monitored by the Financial Regulator.

My colleague the Tánaiste and Minister for Enterprise, Trade and Employment set up a Clearing Group including representatives from the main banks, business interests and state agencies, which is chaired by her Department. The purpose of the group is to identify specific patterns of events or cases where the flow of credit to viable businesses appears to be blocked and to seek to identify credit supply solutions.

Finally, under the NAMA Act I will shortly be issuing guidelines to ensure that SMEs, 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 that 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 people with experience and credibility. The banks must comply with the recommendations of the review process, or explain why they will not do 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. Mr John Trethowan, an experienced banker with a demonstrated commitment to public and social service, is overseeing the establishment of this credit review system with initial administrative support from Enterprise Ireland. Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that Mr. Trethowan will be in a position to commence reviews shortly. I have no plans to set up a Business Asset Management Agency as suggested in the correspondence received by the Deputy.