Michael McGrath (Cork South Central, Fianna Fail)
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128. To ask the Minister for Finance his views on whether a probe needs to take place here into a bank's (details supplied) handling of small and medium-sized enterprise debtor customers similar to the probe in the UK into its parent company (details supplied) and SME debtors being moved into its global restructuring group; and if he will make a statement on the matter. [35660/16]

Michael Noonan (Limerick City, Fine Gael)
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The Tomlinson report dealt with the lending practices of UK banks to Small and Medium Sized Enterprises (SMEs) and it alleged that a division of Royal Bank of Scotland (RBS), the Global Restructuring Group, was guilty of "systematic and institutional behaviour" in artificially distressing otherwise viable businesses. Following this report, the UK's Financial Conduct Authority (FCA) appointed Promontory Financial Group to further investigate these allegations.  Promontory's work along with the involvement of the FCA, led RBS last week to announce redress for certain SME customers.

As I have previously answered, Ulster Bank Ireland Limited undertook an independent review into the relevance of these allegations to its corresponding division, namely the Global Restructuring Group Ireland (GRGI).  On the 19th December 2014, Ulster Bank published the findings of the independent review by Mahon Hayes Curran into practices at GRGI. The investigation found no evidence to support the allegations and suggested that GRGI's driving policy was to manage its customers through the cycle, supporting them where possible to return them to viability.

The Central Bank is the statutory body with responsibility for the investigation of any such allegations in an Irish context and I consider this a matter for the Central Bank.  I am confident that legislative changes since the financial crisis have equipped the Central Bank with an array of investigative, regulatory and enforcement powers to ensure that regulated financial service providers adhere to the requirements of financial services legislation.  These changes include significantly enhanced powers for the Central Bank to gather information under the Central Bank (Supervision and Enforcement) Act 2013 which broadened the Banks' information gathering and authorised officer powers.  It is evident that the Central Bank is properly undertaking its enforcement role by the recent sizeable settlements in enforcement cases.

In addition to this enforcement role, the Deputy may be aware that the Central Bank is proactively regulating the financial system and has issued regulations aimed at protecting SMEs when dealing with regulated and unregulated firms as set out below.  These strengthened regulations include the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 which came into operation for regulated lenders (other than credit unions) on 1 July 2016 and in the case of credit unions, will come into operation from 1 January 2017.  These revised SME Regulations introduce specific requirements for regulated lenders, including:

- Contacting SME borrowers who have been in arrears for 15 working days;

- Warning SME borrowers if they are in danger of being classified as not co-operating; and

- Expanding the grounds for appeal and setting up an internal appeals panel.

In relation to unregulated firms, the Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 was enacted on 8 July 2015. It was introduced to fill the consumer protection gap where loans were sold by the original lender to an unregulated firm. The 2015 Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'.  Credit Servicing Firms are now subject to the provisions of Irish financial services law that apply to 'regulated financial service providers'. This ensures that relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes (such as the SME Regulations noted above) issued by the Central Bank of Ireland.