Brian Hayes (Dublin South West, Fine Gael)

I thank the Deputy for raising this most important issue of credit availability for small and medium enterprises. One of the key priorities of the programme for Government is to ensure an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme of the banks. The Government has introduced a number of policy tools to achieve this objective. For example, the banking system restructuring plan creates capacity for the two pillar banks - Bank of Ireland and AIB - to provide for lending in excess of €30 billion from 2011 to 2013. SME and new mortgage lending for these banks is expected to be in the range of €16 billion to €20 billion during this period. This lending capacity is incorporated into the banks' deleveraging plans which allow for the repayment of Central Bank funding through asset run-off and disposals during the period.

The Government has imposed lending targets on the two domestic pillar banks for the three calendar years from 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities for SMEs. They achieved their lending targets for 2011.

In addition to the lending targets imposed on the banks, the pillar banks are required to submit their lending plans to the Department of Finance and the Credit Review Office at the beginning of each year, outlining how they intend to achieve their lending targets. They also meet the Department and the Credit Review Office on a quarterly basis to discuss progress. The Credit Review Office reviews decisions by the pillar banks to refuse, reduce or withdraw credit facilities from €1,000 up to €500,000. The office is overturning 60% of the decisions referred to it, supplying €6.9 million of credit and supporting 683 jobs in the SME sector. I appeal to SMEs that have been refused credit by banks to avail of the services of the CRO. That is what it is there for and it clearly has a track record of making decisions in favour of SMEs where a negative decision has been made by the banks.

In November 2011, the Government committed to completing an annual action plan for jobs that would involve the whole of Government focusing on what part it and its agencies could play in protecting or creating jobs. A key component of the plan is to ensure that viable SMEs can access credit and the plan introduces a number of important measures to achieve this objective.

The temporary partial credit guarantee scheme aims to provide credit to job-creating SMEs that currently struggle to get finance from the banks. It is intended to address market failure affecting commercially viable businesses in two specific situations, namely, where businesses have insufficient collateral and where businesses operate in sectors with which the banks are not familiar. In addition, a micro-finance fund to provide loans to small businesses is also being developed within the Department of Jobs, Enterprise and Innovation.

The first meeting of the reinstated SME credit consultation committee took place on Tuesday, 12 June. The role of this committee is to provide a forum where stakeholders can communicate and interact regarding difficulties in respect of credit.

I should also note yesterday's launch by the Minister for Finance of Silicon Valley Bank's commitment, in collaboration with the National Pensions Reserve Fund, of a minimum of US$100 million in new lending to fast-growing Irish companies in the high tech technology and innovation sector.

In November 2011 Mazars published a report commissioned by the Department of Finance outlining the situation in credit demand by SMEs in the period April to September 2011. This was an extensive survey of firms across the SME sector conducted by a professional market survey company. Of the 1,500 SMEs surveyed, only 36% requested bank credit in the period and, of these credit applications, some 70% were approved or partially approved when pending applications were excluded. As I mentioned earlier, the Credit Review Office offers an important mechanism separate from the banks' internal appeals procedures for SMEs to have the decision of the bank reviewed. The Government would encourage more active use of the office by those companies that feel aggrieved at the decision of the banks on their credit applications.

It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.

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