Committee to review loans refused to small businesses

A NEW State-backed credit review committee, which aims to tackle the issue of credit to small and medium-sized businesses, was formally launched yesterday. Despite having no statutory role, the head of the new Credit Review Office, John Trethowan, is confident that the new body will result in a change to banks’ lending practices.

SMEs, farm owners and sole traders who have had their written application for credit refused or reduced, and feel that the bank’s decision is unjustified can apply to the office once the borrower has already gone through the bank’s own internal loan appeals process.

Only banks involved in the National Asset Management Agency will be covered under the scheme, although other financial institutions can join voluntarily.

The review process will deal with loans of up to €250,000, although Mr Trethowan said this may be extended if the office finds there is sufficient demand.

The Credit Review Office, which is operating from today, is based in the East Point Business Park. Mr Trethowan will have a small team of administrative staff. In addition, the office has a pool of about six former bankers who will work as case reviewers and will be paid on a case-by-case basis.

Mr Trethowan said the application process was specifically designed to avoid unnecessary bureaucracy. A minimum fee of €100 and a maximum charge of €250 will be levied for the service, based on a percentage of the loan request. Mr Trethowan will provide quarterly reports outlining the progress of the committee.

Separately, Mr Trethowan will meet AIB and Bank of Ireland next week to discuss how they intend to fulfil the new lending requirements outlined by the Minister for Finance earlier this week.

On Tuesday, the Minister announced that AIB and Bank of Ireland must make available a minimum of €3 billion each in new credit facilities to SMEs this year and next, and must submit plans on how they are to achieve this to the Department of Finance within six weeks. These plans will then be reviewed by Mr Trethowan.

Patricia Callan of the Small Firms Association welcomed the establishment of the new office yesterday. She said despite the fact that it is not legally binding, the scheme will exert pressure on banks to account for their lending practices and to explain their decisions.

She also welcomed the quick turnaround time – under the scheme, banks will have 15 days from when the agency contacts them to reply.

The borrower will then be contacted and a decision will be made within five days.

ISME’s Mark Fielding said the establishment of an overseeing body would “keep the banks honest”. Businesses with less than 250 employees and an annual turnover of less than €50 million, can apply for the scheme.