Irish Economy
Irish Economy 2015: Banks will have to detail reasons for SME loan decisions
By Michael Hennigan, Finfacts founder and editor
Jan 12, 2015 - 7:57 AM

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Irish Economy 2015: The Central Bank proposes today that banks will have to give more detailed information to customers on loan decisions.

The Bank has published a consultation paper reviewing the Code of Conduct for Business Lending to Small and Medium Enterprises (SME Code), which was introduced in 2009 and it is seeking public submissions on its proposals by April 13.

It says that the SME Code provides protections for SMEs across a range of areas, including applications for credit facilities, declining/withdrawing credit facilities, financial difficulties, the provision of information, and handling complaints.

The Central Bank carried out a review and in the case of credit application declines, it showed that: a) where SME credit applications are declined in writing, lenders typically use standard letters that provide limited information on the reason for declining the application; and b) where it was presented to the Central Bank that more detailed information was provided to applicants verbally, in a number of cases SME lenders did not have a record of these discussions.

The Central Bank said it wrote to the lenders inspected requiring them to take the steps necessary to ensure that letters issued to SMEs set out sufficient details on the reasons for the decline and also to ensure that adequate records of the reasons for the decline provided verbally to the SME are maintained. This feedback was also provided to other SME lenders in order to improve practices across the industry.

The Central Bank is proposing additional and enhanced protections to further strengthen the existing SME Code including requirements for lenders to:

  • provide information on the application process and associated timelines;
  • assess affordability;
  • provide reasons in writing for declining credit that are specific to the application (or part thereof) that was declined;
  • provide increased information to borrowers about their policies for dealing with financial difficulties, including the implications for borrowers of not co-operating;
  • provide detailed information to borrowers in financial difficulties about an offer of an alternative arrangement;
  • expand the appeals provisions to include decisions on declining or withdrawing credit and decisions regarding terms and conditions; and
  • provide information to the customer about:
    • Government supports available from or through the lender;
    • the lender’s appeals process and the role of the Credit Review Office (where relevant); and
    • the complaints process including, where relevant, to the Financial Services Ombudsman (FSO).

Bernard Sheridan, director of Consumer Protection, said:  “This consultation paper sets out important proposals on requirements to be placed on lenders when dealing with SMEs seeking to access credit or when in arrears or financial difficulties.  SMEs perform a significant role in our economy and it is important that they can deal with regulated lenders with confidence that the process is transparent and their interests are protected. We would encourage submissions from all interested parties”.

Submissions can be made, by email to code@centralbank.ie Comments and queries can be sent to the same email address. The closing date for submissions is 13 April 2015.  All submissions will be published on www.centralbank.ie.


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