Tom Fleming (Kerry South, Independent)
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To ask the Minister for Finance the reason banks are allowed to continue to increase charges and interest rates whilst at the same time refusing to lend to viable businesses; if he will intervene in this issue; and if he will make a statement on the matter. [45937/12]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank hasno statutory role in the setting of interest rates charged by regulated entities apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. The lending institutions in Ireland are independent commercial entities. Ultimately the pricing of financial products, including, interest rates and products is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.

Neither the Central Bank nor I have any responsibility for increased charges and interest rate charged by the financial institutions. I have no powers to compel the institutions to reduce their rates or to lend to viable businesses. However, the Deputy should be aware that the Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. The pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. The banks also meet with the Department and the CRO on a quarterly basis to discuss progress.

Oversight by the CRO applies to both pillar banks - AIB and Bank of Ireland. SMEs, sole traders or farmers can apply for a review where credit is refused, withdrawn, or offered on unreasonable conditions. Banks have set up formal internal review processes, which must first examine an appeal by a customer. Ulster Bank has also set up an internal appeal process. The CRO ensures that the banks do not refuse credit to viable businesses, both by its existence and by offering the right to a review of refusals.