Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

The essence of this question is credit. As we know, the banks are deleveraging through the sale of their portfolios of loan assets, mainly abroad, and also by not giving out new credit. Last year, the Government set targets for credit given by the pillar banks to the SME sector. The banks say, and the Credit Review Office confirms, that they gave out €8 billion of lending last year to SMEs of which €2.5 billion was new lending to the SME sector. That same sector repaid €4.5 billion to the banks over the course of last year. Therefore, the amount of credit in circulation among SMEs last year contracted by €2 billion. Part of the reason for that, and for the banks' lack of risk appetite, is that they are striving to meet targets. They are rebuilding their balance sheets. That needs to happen. We all acknowledge that deleveraging is a requirement and that the banks need to shrink their exposure. It is, however, having an impact on the economy. The overall GDP figure for last year was quite positive, at almost 1%. The third quarter, Q3, figure showed negative growth and the fourth quarter, Q4, was absolutely flat. Part of the reason the economy is not doing better is that credit is still the main issue.

The banks are ahead of target in achieving these requirements. If there is any headroom and if the advice from the Central Bank is that easing off on achieving those targets so quickly could result in additional credit becoming available for the economy, then that is something we should look at. That is why I make this proposal.

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