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

I thank the Deputy for his question. As he will be aware, in 2013 the Central Bank of Ireland conducted a Balance Sheet Assessment, BSA, of the PCAR banks, namely, the banks that were subject to the Prudential Capital Assessment Review, being AIB, Bank of Ireland and Permanent TSB, which assessment incorporated an Asset Quality Review, AQR. The results of the review were shared with the external partners at end-November 2013 as agreed under the programme and with the participating banks to inform their ongoing capital and financial plans. The Central Bank has not commented on the participant banks in relation to their results of the BSA.

I have seen the results of the BSA as this was a commitment under our funding programme. As with all other such commitments, my Department communicated them to the troika by the appointed deadline. The results are very technical in nature and I am under a legal obligation to keep the details confidential. As the AQR is seen as part of the European Central Bank’s comprehensive assessment, the findings of the BSA are not being published separately. The interpretation of the results is a matter for the Central Bank. However, I am pleased that the Governor has informed me that there will not be an additional regulatory capital requirement in the banks as a result of this process.

Publication of individual BSA results is a matter for the banks to decide. I refer the Deputy to the statements made by the individual banks. As he will be aware Bank of Ireland has issued a detailed public statement on the outcome of the BSA. I am advised by AIB and Permanent TSB that they will consider the findings of the BSA in the preparation of their year-end December 2013 financial statements.

In relation to the banks' capacity for new lending being impacted by the BSA, I draw the Deputy’s attention to the statements made by the President of the European Central Bank, Mario Draghi, at the ECB press conference on 9 January 2014, wherein he specifically addressed this point. Mr. Draghi was asked whether the need to undertake the AQR, being part of the assessment, has delayed the recovery in lending. Mr. Draghi gave a detailed response to this question with reference to eurozone banks. I suggest that the Deputy read Mr. Draghi’s response, which for his convenience, I would summarise as follows: There might have been some short-term deleveraging by the banking system in order to prepare for the assessment but this needs to be counterbalanced by two points: the long-term greater health of the banking system on completion of the AQR and the reopening of the capital markets for banks.

Additional information not given on the floor of the House.

As the Deputy will be aware the PCAR banks have returned to the capital markets. I welcome that fact and note that the demand has been very strong for each of the capital market transactions recently undertaken by the PCAR banks. As the Deputy will be aware the level of new lending, in particular new mortgage lending, in the Irish economy was depressed during the financial crisis. Clearly the level of new lending that takes place is influenced by the level of supply of and demand for such lending. It has been evident that there has been an increase in the level of new lending in the Irish market in the second half of 2013 and I expect that the flow of credit into the economy is likely to continue to increase in 2014. My officials critically review the level of new lending - mortgages and SME - regularly and I am not aware of lending being negatively impacted by the BSA.

As the Deputy will also be aware this Government has since it took office pursued a number of initiatives to increase the supply of credit to businesses and individuals. A key aspect of the Action Plan for Jobs 2013 was the facilitation of access to finance for SMEs. The Government has taken a number of significant initiatives aimed at providing equity support to SMEs. In this regard the National Pensions Reserve Fund, NPRF, has set up a number of funds, including the SME corporate fund, which is a €450 million fund, the SME equity fund, a €300 million to €350 million fund, and the SME turnaround fund, a €100 million fund. A number of other initiatives including the credit guarantee scheme and the microenterprise loan scheme have also been implemented by Government.

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