Dáil Éireann Debate, Tuesday - 2 December 2014
204. Deputy John McGuinness asked the Minister for Finance if there will be an appeals system in place for loan applicants who are refused support from the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46086/14]
View answerAs the Deputy will be aware, section 2 (b) (ii) of the Strategic Banking Corporation of Ireland Act 2014 lays out the purposes of the SBCI and empowers the SBCI to lend to SMEs through on-lending enterprises. It is the on-lenders who will assess the risk of the loan propositions from their customers.
The SBCI is based on a common and successful on-lending model that is used across Europe and further afield by national promotional banks for example by Germany's KfW and Spain's ICO. The on-lending model has many advantages over direct lending and is designed to ensure that as much of the benefit of the SBCI's lower funding cost is passed onto SMEs. This helps the SBCI to maintain a lean operation and avoids as much operational overhead as possible. Also, the SBCI can better deliver on one of its key goals i.e. that of diversifying the SME finance market, by operating as a wholesale lender rather than entering the SME finance market directly. The SBCI's focus is to facilitate the funding of new entrants to this market in order to expand the range and profile of SME lenders in Ireland. As a result, enhanced sustainable competition in the SME finance market has the very real potential to improve the terms and conditions offered by finance providers to SMEs.
Section 8 of the SBCI Act 2014 requires the SBCI to ensure that SMEs have sufficient prudent finance to fund their commercial activities and mandates the SBCI to design credit facilities that meet the needs of SMEs. As a result, part of the SBCI's operations will be to analyse whether or not the SME sector is receiving the optimum level of credit and service from the market and that may include examining lending conditions. The SBCI is mandated to design products which address any such problems arising.
On the issue of appeals, SMEs refused credit from AIB and Bank of Ireland can have their application reviewed by the Credit Review Office where either of these banks are SBCI onlenders. As announced in my Budget 2015 speech, Permanent tsb will shortly recommence actively lending to the SME sector, and has agreed to participate in the Credit Review Office process, with Ulster Bank actively considering making a similar commitment. Both would be subject to a similar CRO appeal mechanism where they operate as SBCI onlenders. It is important to note that the SBCI's lending partners hold the risk of the individual SME loans.
The Credit Review Office will provide the lending partner with an opinion on whether it agrees with a rejected lending proposal or not. The lending partner can then respond to this opinion and confirms the next steps in response to the recommendations set out by the Credit Review Office. Where the Credit Review Office has upheld a lending partner's decision not to lend, the opinion will always seek to provide alternatives and guidance to the borrower to help the business move forward.
