Irish Credit Review Office: Bank of Ireland and Allied Irish Bank have each agreed to advance annual credit of €3bn to viable SMEs over next 2 years. The head of the Credit Review Office said the banks advised that where change has occurred, it has been in the tightening of adherence to compliance with lending policy criteria in the sanctioning process. He saw no evidence that credit overall was restricted.

The Minister for Finance and the Minister for Enterprise, Trade and Innovation today published the first quarterly report of John Trethowan, the Credit Reviewer, and summary Lending Plans for Bank of Ireland and Allied Irish Bank. These Plans are summaries of the more detailed commercially sensitive Plans submitted to the Minister for Finance as required under the NAMA legislation.

Both Ministers said unless our banks lend to viable businesses, our economic recovery will be stunted. “The overriding objective of Government is to ensure that the economic recovery that is now underway sustains existing jobs and creates new jobs. To achieve that objective, it is vital that credit is provided to Small and Medium Sized Enterprises which will be the key drivers of job growth,” said  Lenihan. He welcomed the lending plans of Bank of Ireland and Allied Irish Bank which outline how they will achieve the target of €3bn lending each over each of the next two years. “These plans have been reviewed by John Trethowan and both his Office and my Department will receive monthly progress reports from the two banks which will allow us to ensure they deliver on the strong commitments given in their plans to support viable businesses in all sectors of the economy and in every area of the country.”

The Minister for Enterprise, Trade and Innovation, Batt O'Keeffe TD, said: “The submission of the banks' tailored lending plans, together with the new internal appeals mechanism and credit review office, are significant steps the Government has insisted on taking on behalf of small businesses-owners who rightly demand a credit return on the investment they have made in our banking institutions.

I look forward to working closely with the credit reviewer and with the Minister for Finance in sustaining pressure on the banks to lend to viable small businesses so that jobs can be protected and created and our economic recovery secured.”

The Ministers also welcomed the inclusion in the lending plans a range of measures help foster business demand and to improve the service banks provide to their smaller business customers.

Credit Review Office

The Minister said that Trethowan’s findings in his first quarterly report would enlighten the debate about the availability of credit to business. He noted that Trethowan had found no evidence of constraints in the supply of credit to any sector of the SME / Farm markets in his review of the banks’ policies and guidelines. Trethowan also found evidence of a lack of experience among some front line bank staff in dealing with SMEs and helping them with loan applications.

Quarterly Report from John Trethowan, Credit Reviewer - lending to SMEs

Allied Irish Banks SME Lending Plan

Bank of Ireland SME lending Plan

“I am particularly pleased that the establishment of the Credit Review Office has led to a significant improvement in the banks’ own internal appeal mechanisms, which resulted in 20% of cases being successful although the numbers involved are still small. I would urge SMEs who are refused credit to invoke the internal appeals procedures followed if necessary by the Credit Review Office.”

The Minister set out the work of the Credit Review Office to date:

• The Office operates a web site which received hits from over 2000 different users. The helpline has received almost 200 calls to date.

• Trethowan has completed six reviews. He agreed with the bank in three of them, sided with the borrower in two cases and considered that more work was required by both the borrower and the bank in the other case. A further five applications are proceeding through the process.

• Trethowan also worked with the two banks on placing their internal appeal mechanisms on a more formal basis. Of a total of 49 internal appeals completed between the two banks, 10 resulted in the refusal being overturned or sanctioned with conditions.

Although only a small number of reviews have been completed, the Minister said he was satisfied with the positive impact of the Credit Review Office which has given an independent right of appeal to businesses seeking credit and has resulted in the reversal of some credit refusals.

The low level of reviews to date may reflect a lack of awareness of the Credit Review Office but the Office has publicised its services through the media and in presentations to representative organisations. The two banks are required to make borrowers who are refused credit aware of the existence of the Credit Review Office and have been provided with leaflets on the Office for distribution to borrowers.