Clarity From The Central Bank On Lending To SME's

Author:Mr Patrick Molloy, Peter O'Brien, Alan Keating, Alma Campion, Rory McPhillips, Laura Gleeson, Donal O'Donovan, Stuart Kennedy, Chris Quinn, William Prentice, Ruth Hunter, Turlough Galvin and Christian Donagh
Profession:Matheson
 
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Helpful amendments have recently been introduced to what are referred in the Irish market as the "SME Regulations" (the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium - Sized Enterprises) Regulations 2015 which were signed into law on 17 December 2015) with a view to enabling regulated lenders to take account of data measured at a group level when considering whether they need to treat a borrower as coming within the ambit of the SME Regulations.

Timing

The amending regulations (the full title of which is the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium - Sized Enterprises) (Amendment) Regulations 2018 (S.I. No. 18 of 2018)) took immediate effect from 23 January 2018 (the "Amending Regulations").

Context

Under the terms of the SME Regulations various obligations were imposed on "regulated entities" (i.e. regulated financial service providers) when:

providing or offering to provide credit to a borrower or from which a borrower is seeking to avail of credit, entering into, offering to enter into or with which a borrower has sought to enter into a credit facility agreement, to which a borrower is a party or will be a party, proposing or undertaking preparatory work for entering into a credit facility agreement with a borrower and any related activities, providing or offering to provide an alternative arrangement, or engaging in credit servicing activities. The borrowers coming within the ambit of the regulations consist of "micro and small enterprises" and "medium-sized enterprises".  The obligations imposed on regulated entities are more extensive in the case of micro and small enterprises in comparison to the obligations imposed in the case of medium-sized enterprises.  These obligations do not arise where, amongst other things, (i) credit has been offered or granted by two or more regulated entities working together to provide funds to one or more borrowers as part of the same credit arrangement and (ii) credit is offered or granted to special purpose vehicles.

The definitions of what is a micro and small enterprise and what is a micro, small and medium-sized enterprise as provided for in the SME Regulations did not provide for regulated entities to take into account the turnover and assets of the broader group of companies of which such an enterprise is a part.  This is something that had been catered for in the predecessor to the SME...

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