Update: Lending Sector 4th July 2014

4th July 2014 - Bernard Durkan TD

QUESTION NOS: 57,59

DÁIL QUESTIONS addressed to the Minister for Finance (Deputy Michael Noonan)

by Deputy Bernard J. Durkan,Bernard J. Durkan

for WRITTEN ANSWER on 03/07/2014

* To ask the Minister for Finance the steps that will be taken to encourage the lending sector to meet the credit requirements of the domestic economy; and if he will make a statement on the matter.

– Bernard J. Durkan T.D.

For WRITTEN answer on Thursday, 3 July, 2014.

* To ask the Minister for Finance the extent to which the lending institutions can be encouraged to meet the working capital needs of small and medium enterprises; and if he will make a statement on the matter.

– Bernard J. Durkan T.D.

For WRITTEN answer on Thursday, 3 July, 2014.

REPLY.

As the Deputy is aware, as part of the 2011 recapitalisation exercise, the Government imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion last year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their targets.

Having completed a process of deleveraging, both AIB and Bank of Ireland are now concentrating on growing their balance sheets. In this context, both banks recognise the need to increase business lending in the period up to 2016, including lending for working capital purposes, and have put on record their commitment to the SME sector. Although the targets were a useful policy intervention, the focus now needs to shift towards the collation and examination, on a monthly basis, of more granular data on the funding of the activities of SMEs from both AIB and Bank of Ireland, the wider banking sector and increasingly the non-bank funding sector. This focus is further underpinned by the commitments contained in the “Access to Finance” chapter in Action Plan for Jobs 2014. I recently wrote to the banks with a view to ensuring their continued commitment to work closely with my Department in faciliatating a positive business environment in which SMEs can prosper and contribute to economic growth, in addition to maintaining and increasing jobs in this vital sector. In addition, AIB and Bank of Ireland meet my officials on a quarterly basis to keep them abreast of issues pertaining to the SME sector, both in the area of SME lending and distressed SME borrowers.

I would remind the Deputy that the Credit Review Office look at cases where borrowers have their loan applications refused or feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment. I am informed by the CRO that they have overturned 55% of appeals to a value of €16.6m leading to the creation or maintenance of 891 jobs.

The Government has agreed to proceed with putting legislation establishing the Strategic Banking Corporation of Ireland before the Oireachtas. It is hoped that the Oireachtas will pass the legislation before the summer recess. During its first year of operations, the Government s ambition is that the SBCI will lend €500m to SMEs for investment. Experience in other countries suggests that any lending facilitated by a state investment bank of this type is generally complementary to lending already taking place in an economy.

Bernard Durkan TD

Kildare North

Bernard J Durkan is the Fine Gael spokesperson on Public Expenditure, NDP Delivery and Reform. Originally from Killasser, Co Mayo,…

Update: Lending Sector 4th July 2014

Bernard Durkan TD

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