John McGuinness (Carlow-Kilkenny, Fianna Fail)

I have no plans to establish a State guaranteed loan for small and medium-sized enterprises, SMEs. The Government's recapitalisation scheme for Allied Irish Banks and Bank of Ireland, announced on Wednesday, 11 February 2009, is a fundamental requirement in restoring stability to our financial sector. Such stability will ensure that the financial institutions can actively contribute to our economic activity and particularly support our enterprise sector.

A key principle of the recapitalisation package is the recognition of the importance of business lending particularly for SMEs. Small and medium-sized enterprises are central to our economy and the provision of bank credit to the sector is a primary target of the overall package. This package contains a range of initiatives that will directly assist our enterprise sector in facilitating access to credit.

Under the recapitalisation scheme, Allied Irish Banks and Bank of Ireland have committed to measures to maintain a flow of credit to small businesses. They have committed to increasing lending capacity to small and medium-sized enterprises by 10% and to providing an additional 30% capacity for lending to first-time buyers in 2009. If the mortgage lending is not taken up, then the extra capacity will be available to SMEs. A €100 million environmental and clean energy innovation fund is also being established by each bank, as well as a further €15 million each to new or existing seed capital funds. Much of this funding will flow to small businesses.

The recapitalised banks have also agreed to fund and co-operate with an independent review of credit availability which will be managed jointly by the banks, Government and business representatives and will report within five weeks.

A code of conduct for business lending to small and medium-sized enterprises was published by the Financial Regulator on 13 February. This code will facilitate access to credit for sustainable and productive business propositions, and will promote fairness and transparency in the treatment of SMEs by banks. The code should strengthen the bank-client relationship and develop greater trust and confidence in the banks' lending practices. Banks are now actively promoting new lending as evidenced by recent press and television advertisements.

The Tánaiste met with representatives of the banks only last week and impressed upon them the need to ensure that credit is available to viable businesses. She has asked the banks and enterprise support agencies to work closely together to facilitate lending to enterprises.

Additional information not given on the floor of the House.

Funding to the SME sector is also provided through my Department and the State enterprise support agencies. The Department's continuous support for indigenous companies arises through maintaining a positive business environment and particular interventions from State agencies such as Enterprise Ireland, FÁS and the county and city enterprise boards. The allocations in my Department's Estimates for 2009 will ensure that we continue to build on this strategy for the future.

SMEs are central to our economic development and the range of measures and supports in place will continue to help the sector adapt to the current economic climate. The services provided by the development agencies are kept under review and will be adjusted to respond to the current economic situation.

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