In March 2010 the Minister for Finance issued statutory Guidelines regarding lending practices and procedures and relating to the review of decisions to refuse credit facilities.  The Guidelines apply, with immediate effect, to the banks and building societies participating in NAMA. They aim to encourage and increase the supply of credit to viable borrowers for business purposes.

Under the Guidelines, any business with fewer than 250 employees or an annual turnover of less than €50 million or a balance sheet value of less than €43 million (an “SME”) may apply for a review of a decision by a participating institution to refuse credit facilities or to restructure existing credit facilities.  The SME is obliged to exhaust all credit appeal mechanisms available within the participating institution first.  The cost of an application is not prohibitive – application fees for an SME will be between €100 and €250.

Certain decisions are not reviewable under the Guidelines. The legislation is not retrospective, and will only cover loans of between €1,000 and €250,000. Any refusal to grant credit because of EU State Aid rules cannot be challenged.

The participating institution’s decision is reviewed by a “Credit Reviewer” (a government appointed role) who investigates the decision, carrying out such inquiries and collecting information in such form as he chooses. The participating institution is informed of the application for review, and given the chance to make submissions in response.

Interestingly, the Guidelines place strong emphasis on the informal nature of the Credit Reviewer’s role, noting that “the review process will be conducted with as little formality as possible and as expeditiously as possible.  Any formality that is necessary to the process shall be to the smallest degree possible.” The Guidelines further specify that the Credit Reviewer will not be bound by the normal rules of evidence.

Credit Reviewers are empowered to support the participating institution’s decision not to grant credit or to restructure facilities, to recommend that facilities are in fact granted, or to make any other recommendation considered appropriate in the circumstances.

The Guidelines also provide the Credit Reviewer with the opportunity to review and report on the lending policies of a participating institution, to analyse the numbers of successful and unsuccessful claims for review it receives and to examine the extent to which a participating institution has complied with recommendations made.