Participation in Monetary Union led to a structural shift whereby interest rates in this economy which had been set by the Central Bank of Ireland were reduced to the lower levels pertaining in the euro area. While lower interest rates are clearly beneficial for an economy in the medium and longer term, clearly nominal interest rates over most of the last decade were lower than they would otherwise have been given the strength of domestic demand at the time.
With regard to the banking system and lending to the real economy, the second Mazars report on credit availability, published in December, confirmed that while some SMEs are facing significant challenges accessing credit, and the sector in general is more conservative in its borrowing, nevertheless new lending is still taking place. However, the proportion refused credit, especially in certain sectors, remains a concern for Government.
The Deputy will be aware that under the NAMA Act I will shortly be issuing guidelines to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the NAMA participating banks. I hope that banks not participating in NAMA or covered by the Government guarantee will also decide to join the system. My aim is to have a simple, effective review process, run by people with experience and credibility. The banks must comply with the recommendations of the appeal process, or explain why they cannot do so.
In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all.
Mr John Trethowan, an experienced banker with a demonstrated commitment to public and social service, is overseeing the establishment of this credit review system with initial administrative support from Enterprise Ireland. Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that Mr. Trethowan will be in a position to commence reviews shortly.
