Written answers

Wednesday, 10 November 2010

Department of Finance

Credit Availability

9:00 pm

Photo of Caoimhghín Ó CaoláinCaoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 102: To ask the Minister for Finance if he has audited the delivery of lending commitments by banks made as part of the €7 billion recapitalisation agreement in 2009; the progress that has been made to date by Allied Irish Banks and Bank of Ireland in delivering €3 billion in credit each to small and medium enterprises; when will he be able to audit the lending plans of the two institutions for this year; if he is satisfied that banks are meeting the needs of Irish business; and if he will make a statement on the matter. [41574/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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In the subscription agreement, AIB and Bank of Ireland were tasked with making available 10% additional capacity for SME lending in 2009. While the figures are not audited as such, both banks report to the Financial Regulator and to my Department on a quarterly basis on progress on SME lending. The banks stated that there were no constraints on lending to viable businesses. However, the 10% target did not result in the expected level of additional lending. The following table outlines the lending of AIB and Bank of Ireland to SMEs in 2009.

€m'sSanctionedDrawndown
AIB2,5071,620
BOI3,1582,533

As part of the transfer of loans to NAMA, both banks undertook to make available not less than €3 billion each in both 2010 and 2011 for lending to SMEs. They were required to produce lending plans on how they would achieve this. Summary versions of these plans were published with the first quarterly report from Mr John Trethowan, the credit reviewer. These plans were reviewed by John Trethowan and the Department and were found to be credible.

The Deputy will be aware that my Department and Mr. Trethowan of the Credit Review Office receive monthly progress reports from the two banks which allow us to monitor their lending to viable businesses in all sectors of the economy and in every area of the country. This information is commercially sensitive. The banks have 12 months to reach their targets and the overall results of their activities will be published in due course.

In addition to the monitoring, the Credit Review Office reviews decisions of banks to refuse credit on application from the customer to ensure that the banks are not refusing to lend to viable businesses.

Both banks insist that there are no constraints on lending bar demand from viable businesses. To back this up, Mr. Trethowan has reported to the Department that both AIB and Bank of Ireland remain open for business and borrowers should use the Credit Review Office if they find this is not so.

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