Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

This Government has been working hard to create an environment conducive to new entrants through a number of initiatives and has been leading the debate at EU level on the mechanisms to promote alternatives to bank financing. While it is disappointing that ACC and Danske Bank have taken the decision to withdraw from the Irish market, one of the key features of banking strategy in the financial crisis has been the retrenchment to national borders. One of our expectations from the financial crisis is that market shares in traditional banking services will become more fluid during the recovery as the banking landscape continues to adjust to the withdrawal of foreign players, the restructuring of our incumbent banks and the increasing price transparency of financial services. The withdrawal of particular services and the closure of certain aspects of the business of some banks is a realisation of this expectation.

We expect that over time this will present opportunities for the entry of new market participants that are well positioned to be confident in the future profitability of an Irish branch or subsidiary. While the current market may not be attractive to a fully diversified bank challenger in the short term, I expect new financial services providers to enter the market on a more targeted basis - for example, as specialist lenders and non-bank finance providers.

The Government has decided to establish the Ireland strategic investment fund, ISIF, which will absorb the National Pensions Reserve Fund, NPRF. Using the ISIF, we will maximise our resources to enhance growth in the Irish economy and improve key infrastructure to maintain Ireland's attractiveness as a place to do business and to create employment. Officials of my Department are currently preparing the necessary legislation, which I anticipate will be enacted early next year. Already in the lifetime of this Government, the NPRF has established funds that support strategic projects and a number that support SME financing. Further assessment of the need to create a strategic investment bank over and above the contribution expected from the ISIF will be informed by the requirements of the economy once the Government’s key immediate objectives for the repair of the banking system have been completed.

The Taoiseach mentioned in this House last week that he had discussions with the German Chancellor, Angela Merkel. Germany is keen to help and, specifically, to find ways to reinforce Ireland’s economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish SMEs. The German Government has asked KfW, the German development bank, to work with the German and Irish authorities to swiftly deliver on this initiative at the earliest possible date. Officials of my Department have already exchanged working papers on this subject with KfW and the German Ministry of Finance. We held a consultation with the German embassy in Dublin which helped pave the way for discussions with the German Ministry in Berlin yesterday, and further discussions will be held with KfW and other key stakeholders over the coming weeks both here and in Germany. I am keen to see the establishment of a healthy and balanced relationship. As we are trying to ensure that any initiative that comes out of this process is as effective as it can be, we will be discussing approaches that meet the strategic objectives of both States.

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