Peter Mathews (Dublin South, Fine Gael)

The sentiment, objectives and aspirations of the Credit Guarantee Bill are worthy, of that there is no doubt. It attempts to focus on the small and medium sized enterprise sector in our economy. It is the largest employer in the economy and it is starved of cash and credit at the moment because banks have been in a terrible, unattractive haste to correct their balance sheets since the collapse. By correcting their balance sheets they have, wherever possible, drawn in loans and tightened credit. This has been at the expense of many indigenous businesses in the country. Effectively, there have been two distinct economies in recently years: the multinational corporation and foreign direct investment funded economy on the one hand and the home grown national enterprises, the target of this Bill, on the other. The Bill is relevant for firms with employment levels up to 250, turnover and sales revenues of up to €50 million and a balance sheet size of €43 million.

A total of €150 million of loan guarantees could be provided in what is termed a portfolio arrangement whereby, for example, the two remaining banks could divide the annual portfolio of €150 million equally between them, each taking €75 million. Effectively, the Government would be exposed for 75% of that €75 million per bank and the claims in any one year would be restricted to 10% of that 75% of the loan exposure.

The Bill does not refer to three year lending, portfolios or an annual review. It refers to a review on two months notice. The Bills digest contains worked examples and demonstrations of what is in mind, what it could cost and the benefits that might follow in terms of employment generated by businesses that would benefit from having their loan liabilities guaranteed to the extent of 75%, subject to the cap of 10% of claims.

Working through the demonstrative models the Department of Finance has provided in pages 19 to 22 of the explanatory memorandum, it is worthy to see that, based on certain assumptions, the hope is that 1,800 jobs would be provided. If that happened, there would be further spin-off effects because there would be income taxes from those earnings, VAT on the expenditures of those net earnings and so on. It is that fan effect that is good for the indigenous economy because the indigenous economy, unlike the multinational corporation, MNC, economy which is currently earning export surpluses, has been contracting. That is the one that employs about 1.5 million people whereas the MNC economy employs up to 250,000 people depending on one's measurements.

Deputy Ó Cuív also mentioned the ICC and the ACC. I worked in the ICC for 20 years. The target objectives of bringing credit into Irish owned businesses was achieved over a 70 year period where every year from 1933 until the time I left in 1988 there were steady, increasing profits. It was an academy of hallmark banking where the structure of the balance sheet was maturity balanced in a proper fashion in terms of the maturity of the funds that were invested in the assets.

There was a venture capital side too, and some of the venture capital companies that the ICC supported are massive successes on the world stage, Tullow Oil being an example. Tullow Oil has a market capitalisation of approximately €6 billion. That started in a small way, promoted by Aidan Heavey and his colleagues. Two former ICC colleagues of mine joined that board. There are many other examples of companies across all sectors of the economy that have done extremely well.

Let us hope there is not too much bureaucracy in this credit guarantee scheme and that it encourages a return by our main banks to proper appraisal of businesses and cash flow lending where executives and managers understand the customers, products, suppliers, all those balances and the management of the companies they support. The sentiment, aspirations and objectives underlying this Bill are good, although it needs to be tightened up. I suggest in a memorandum form attached to the Bill there should be worked examples to ensure people can understand it, as has been shown in the worked, demonstrative example on pages 19 to 22 of the explanatory memorandum.

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