Dáil Éireann Debate, Tuesday - 12 May 2009
166 Deputy Pat Rabbitte asked the Minister for Finance his views on whether banks in receipt of State injections of capital could be using these funds to extend their loan books by cherry picking borrowers in the mortgage, consumer credit and commercial markets; and if he will make a statement on the matter. [18978/09]
View answerParticipating institutions in the State recapitalisation package have committed to increase lending capacity to small and medium enterprises (SMEs) by 10% and to provide an additional 30% capacity for lending to first time buyers in 2009. If the mortgage lending is not taken up, then the extra capacity will be available to SMEs. AIB and Bank of Ireland have also committed to public campaigns to actively promote small business lending at competitive rates with increased transparency on the criteria to be met. Compliance with this commitment will be monitored by the Financial Regulator. Both institutions have met with officials from my Department to give details of the steps they are taking to implement these measures.
An independent review of credit availability, funded by the banks but managed jointly by the banks, Government and business representatives is also underway and will be completed shortly. Amongst the issues covered by this review will be changes in bank lending, repayment terms and a comparison with customer experiences prior to the onset of the financial crisis.
I should also add that a Code of Conduct for Business Lending to Small and Medium Enterprises was published by the Financial Regulator on 13 February and took effect on 13 March. This code applies to all regulated banks and building societies and will facilitate access to credit, promote fairness and transparency and ensure that banks will assist borrowers in meeting their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner. The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulty the banks will give the customer reasonable time and seek to agree an approach to resolve problems and to provide appropriate advice. This is a statutory code and banks will be required to demonstrate compliance.
This range of measures has been introduced to ensure that the banks continue to lend to credit worthy individuals and businesses in the real economy.
