The payment break scheme coordinated by the Banking and Payments Federation of Ireland (BPFI) and introduced by its Members last March was a welcome initiative that allowed important and necessary cash flow relief to be quickly and efficiently provided to borrowers affected by Covid-19, including SMEs. As the Deputy is aware, the original 3 month payment break was extended by another 3 months for borrowers that requested it.
As these expire, many borrowers are returning to repayment but other borrowers continue to be impacted by the economic consequences of Covid-19, and they may not be in a position to resume their loan repayment commitments when their payment break ends. I am fully aware of the stress and uncertainty that these borrowers are still facing, and they will continue to need assistance and support from their lenders. This point was made very clear to the CEOs of the country’s retail banks, and to the BPFI, by the Tánaiste, the Minister for Public Expenditure and Reform and myself when we met them at the end of September. It was also indicated that it is particularly vital that lenders work with their customers to ensure that suitable arrangements are put in place to assist their customers who are still experiencing difficulty. These arrangement could include additional flexibility, and this could be short term such as additional periods without payments or interest-only repayments, or if appropriate, more long term arrangements. Each case is different and that’s why a case-by-case approach is now the best approach as some sectors of the economy are more impacted than others.
The Central Bank expects all lenders to develop strategies and operational capability to continue to support borrowers who cannot return to full capital and interest repayments after the end of the payment break. This will include offering forbearance as required and restructuring of loans in the event of long-term affordability issues.
With regard to loans to SMEs, regulated financial service providers are required to comply with the Central Bank (Supervision and Enforcement Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015, which are generally referred to as the SME Regulations. These set out the required treatment of SMEs by regulated entities in relation to various aspects of business lending. It includes detailed provisions around the credit application process, requirements regarding security or collateral, credit refusals and withdrawals, handling complaints, managing arrears and having in place policies for engaging with SMEs in financial difficulty.
The SME Regulations also specify that borrowers must be informed about a regulated entity’s internal appeal process in respect of a decision on whether to grant an alternative arrangement. The SME Regulations also state that borrowers with participating lenders should be informed of the Credit Review Office where the participating lender’s decision in relation to alternative arrangements are subject to review by the Credit Review Office. The Credit Review Office (www.creditreview.ie) was established to assist those SMEs and farm borrowers that have had credit applications of up to €3 million refused or have an existing credit facility withdrawn or amended by the participating bank or in relation to alternative arrangements for borrowers in difficulty. SMEs can apply to Credit Review after exhausting the internal appeals process in the relevant participating institution, which are currently AIB, BOI, Ulster Bank and Permanent TSB.
Receivership and the appointment of receivers is a commercial decision for regulated financial service providers to make on a case-by-case basis. The Companies Act 2014 is the relevant legislation, which is under the remit of the Department of Business, Enterprise and Innovation.
I would urge borrowers facing difficulties due to COVID-19 to contact their lenders as soon as possible to make alternative arrangements that will assist them to come through this difficult period.
