Robert Troy (Longford-Westmeath, Fianna Fail) | Oireachtas source

We are all agreed that a well-functioning banking sector is critical to any economy. While there has been massive State support by way of capital, the country still does not have a functioning banking system. I will focus in my contribution on competition and support for SMEs. A Department of Finance study in 2000 reported that more than 80 credit institutions were offering banking services in Ireland of which 11 had a significant involvement in retail banking with branch networks.

In recent weeks, Danske Bank and ACC Bank closed and this followed the closure of Halifax, Postbank, Anglo Irish Bank, Irish Nationwide Building Society and the EBS. We now have a cosy cartel involving two main banks, AIB and Bank of Ireland. This will not be good for business or personal customers because a lack of competition will ensure higher fees and charges, lower deposit interest rates and higher borrowing costs. All we have to do is consider the unprecedented low ECB interest rate, yet variable rate mortgages have increased time and time again in recent years to make up for loss making tracker mortgages.

The problem of tracker mortgages should be tackled as part of an overall review of the future of our banks. The Government should put a case to our European partners for the transfer of these mortgages to a special purpose vehicle with a long-term funding arrangement backed by the ECB. These mortgages pose a particular problem for Permanent TSB, which has an overhang in the region of €15 billion. Perhaps if this was sorted, the revised restructuring plan for the bank, which has been put to the EU Commission, would be approved and we would have a properly functioning, sustainable financial institution with the potential to fill the void in the domestic banking sector.

I refer to the lack of support for the SME sector, which contributes to 70% of all employment and 46% of the gross value added in the economy. This sector has been abandoned by the Government parties. Do they remember their pre-election promise to the retail sector to abolish upward only rent reviews? Like many other promises, that has been broken. There was also a promise to tackle the archaic mechanism for calculating commercial rates but this was also broken. The Government has given a free hand to the energy regulator and there have been three increases in energy prices, which is another cost stifling businesses. It decimated redundancy payments and the sick pay scheme with an increase from three to six in the number of days that employers must cover sick pay. Despite the large scale support the State has given banks, they are not supporting businesses. The Government repeatedly points to all the initiatives it has introduced. To date the microenterprise loan fund has lent a mere €1.62 million. The €415 million credit guarantee scheme was expected to provide €150 million a year lending to small businesses but in the first ten months it has lent only €8.5 million.

I acknowledge progress has been made by way of foreign direct investment but this should not be made at the expense of SMEs, which are the lifeblood of our economy. Funding must be forthcoming to viable and sustainable businesses and the Government should examine our proposal and explore the possibility of establishing an enterprise bank in recognition of the importance of the SME sector to the economy. It is not just our suggestion, as this was promised in the programme for Government. This should be delivered to support SMEs.

Only this week in my constituency the largest exporter of cattle, sheep and pigs, TLT International, went into receivership. The company has operated for 30 years but in the past three years it was unable to access credit from any Irish financial institution and was left with no option but to go to the Hong Kong Shanghai Bank in England to avail of credit. The bank, which is eager to get away from dealing with businesses in this economy, pulled that credit line in the past few days and this has put the company into receivership with the loss of 30 jobs directly and many more indirectly. This is a clear example of how our financial institutions are not working with businesses in the State. Captains of industry and entrepreneurs have ideas. They want to generate employment and create wealth but they are not being supported by the Government or financial institutions. The Government needs to give a clear commitment that it will explore the possibility of establishing an enterprise bank to ensure good ideas are matched with relevant funding.

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