Brian O'Shea (Waterford, Labour)
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Question 86: To ask the Minister for Finance his views on whether the completion of the National Asset Management Agency will not see a significant increase in lending here; his further views on whether private sector credit will continue to contract over the remainder of 2010 and during 2011; and if he will make a statement on the matter. [17212/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The third Mazars report on lending to SMEs, which covers the period from October to December 2009, was published last week. The report showed that credit applications in number and value terms rose slightly in the last quarter of 2009 over the previous quarter, which is encouraging. The level of applications for credit would appear to be stabilising and Mazars also reported a small improvement in the overall credit approval rate. However, the reduction in the stock of credit, as repayments exceed new credit, and in credit quality reported by the banks remains a concern for the Government. To address this concern, I announced earlier this month that AIB and Bank of Ireland are to make available a minimum of €3 billion each for new or increased credit facilities, including working capital targeted at SMEs, in the real economy in each of the next two years.

The recently established Credit Review Office is available to review banks' decisions to refuse credit to small and medium enterprises (SMEs). It will provide an independent opinion of the banks' decisions on whether the credit should have been granted or not. SMEs can also seek a review of a decision to reduce or withdraw credit. 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.

The Financial Regulator has set down capital requirements for each of the banks. Bank of Ireland has already begun to implement its plan to raise €3.4 billion of capital and it was encouraging that the share placing earlier this week was nearly four times oversubscribed. Allied Irish Bank has announced that it is selling assets to raise capital. As I have outlined previously the State is willing to convert some or all of its preference shares, as required, on terms to be agreed that will provide full value for the taxpayer. The combination of cleansed balance sheets, following the removal of the riskiest loans by NAMA, and recapitalisation will put the banks in a stronger position to access liquidity, secure funding and increase lending.