Mr. Aidan Carrigan:

I wish to elaborate on two of the most important themes from the Green Paper, namely, the funding of SMEs and securitisations. The Green Paper explores the ability of capital markets to work better for the small and medium enterprise sector. The traditional dependency of SMEs on bank finance, in particular lending, is highlighted, and of course this is something with which we in Ireland are familiar. Different European Union member states have different conceptions of what “SME” means and, to date, capital markets have tended to focus more on companies in the medium rather than the small enterprise sector. It is not readily apparent from the Green Paper that many of the proposals will directly benefit the average small business in Ireland. This is an area we intend to critically review with a view to ensuring that smaller companies are not excluded from the benefits of capital markets union.

The Green Paper does set out ideas and proposals for reducing SME dependency on bank financing. Before SME markets or instrument types can develop to their potential there are important structural impediments to tackle. For example, the Green Paper highlights the need for higher quality credit information for SMEs and the potential advantages that may arise from standardised credit data and credit scoring. Within a national context members will be aware that a central credit registry, under the auspices of the Central Bank, is scheduled to go live next year and should greatly improve the coverage and quality of SME credit information.

Other issues mentioned in the Green Paper include the potential to develop SME growth markets and also a potential role for crowd funding in becoming a viable alternative to bank-based financing for some SMEs. It would seem to us that crowd funding could potentially play a positive role in financing small and micro businesses. We are aware of existing crowd funding platforms operating in Ireland and have closely monitored EU developments in this emerging area.

In relation to the proposed priorities for early action, we note the related Commission consultation paper on securitisation. This paper follows on from recent contributions by other European institutions, for example, the ECB and the Bank of England, which call for a review of this area and set out the potential benefits of a high-quality securitisation market. This allows for a broader distribution of financial sector risk and can help to free up banks' balance sheets to allow for further lending to the economy. This may, for example, allow banks to expand their SME loan books.

The Green Paper also recognises the potential risks and seeks to address those by putting forward a framework for safe, simple and transparent securitisations. We are fully in agreement with the Commission that the development of the securitisation market should only be facilitated by legislators on the basis that such instruments are safe and sustainable.

Within a domestic setting, the recent international financial services, IFS, 2020 strategy anticipates the potential opportunities that CMU may provide for the sector. It sets out a range of actions which will ensure that Ireland is best placed to attract high quality investment. I refer in particular to the recommendation to examine the potential to develop Ireland as a securitisation hub should CMU open up opportunities in this regard.

Other important themes surface in the Green Paper, for example, the potential for an increased role for the insurance and pensions industry, the greater participation of retail investors in the capital markets and horizontal integration elements that focus on the "union” part of capital markets union. These will need to be carefully considered as part of our consultation.

It is important to reiterate that the capital markets union initiative is still at a very early phase. In reality, it will not be until the European Commission's action plan is published later in the year that we have something concrete before us. Therefore, while the Department is proactively engaging with the subject matter we are not in a position to give definitive views today. We intend to submit comments on the Green Paper in advance of the 13 May deadline. Events such as today’s Oireachtas finance committee hearing and today’s workshop, as well as any submissions received from our open public consultation, will help inform our views and input on the Green Paper.

We support the objectives of sourcing additional capital to businesses to support growth and employment within the EU and our initial position is to welcome the CMU initiative as an opportunity for Ireland. Our objective is to position ourselves at the EU level to ensure Irish interests are understood and taken into consideration. I thank the committee for the opportunity to address it today. I am happy to take questions.