In June 2013, the Central Bank set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers onto longer-term forbearance solutions. The targets set reflect the banks' capacity, processes and systems. The Central Bank has informed the officials in my Department that the banks have reported that they have met their required targets to date. This perspective has been reaffirmed by both the IMF and the European Commission who report that the workout of SME arrears is progressing and that imposed targets are being met.
Resolutions offered to SME customers in difficulty are assessed on the basis of the borrower s maximum affordability. The restructures are often complex due to multiple debt connections. Irish banks are advancing the process of restructuring their SME loan books. I am informed by Bank of Ireland that the annual report for the year ended 31 December 2013 gives comprehensive additional asset quality disclosures on all of its Loan Portfolios from page 380 to 423, including details of forbearance measures on its SME loan portfolios from page 416. In particular, Bank of Ireland have indicated that they had reached resolution in 90% of distressed SME cases.
I am informed by AIB that disclosures in relation to its SME portfolio are contained in the Credit Risk disclosures on page 71 153 of the 2013 Annual Financial Report. In particular, the AIB's results indicate a resolution level of approximately 65%. It is also worth noting that defaulted loans for both banks have reduced year-on-year.
The Central Bank's process of assessing financial institutions in their efforts to move distressed SME borrowers onto longer term sustainable solutions is an important element in assisting SMEs to potentially transition from a distressed to a more sustainable state and will continue in 2014. Additionally, the Government's enactment of legislation to allow small companies (as defined by the Companies Acts) to apply to the Circuit Court for examinership and the on going work of the expanded Credit Review Office are all initiatives that will assist viable SMEs in adressing their debt situation.