Dara Calleary (Mayo, Fianna Fail) | Oireachtas source

I thank Deputy Michael McGrath for sharing his time with me. I take the opportunity of the debate on this finance issue to wish Derek Moran every success and congratulate him on his selection as Secretary General of the Department of Finance, although it is a position though that should have been advertised. When we consider the level of coverage being given to the so-called - on-off or whenever it will be - reshuffle this week and that Mr. Moran will be far more powerful than most of those even in Cabinet who will get positions this week, the level of scrutiny around the appointment needs to be improved. If we are serious about public service reform, every position at that level should be advertised publicly and expressions of interest sought from all over.

This Bill, I regret, represents another false dawn for Irish business and for Irish SME in particular. The kind of bumf that has come with it, is reminicent of some of the worst marketing skills of banks in the so-called boom times. Letting out and giving this kind of information, that this Bill and this organisation could make a substantial business difference to small business, is false and wrong. This is the kind of thing that would have been exposed if there was a proper scrutiny of this legislation, rather than rushing it through in the last week of this Dáil session. This is the kind of thing that would have been exposed and teased out in a pre-legislative stage where groups and organisations, on whom this is supposed to impact, could have come into the committee and given their views on it, but we will be deprived of that.

The model we are being asked to support here is the model that underpins the credit guarantee scheme, where the State acts as an overarching guide, as it were, for the pillar banks and they are then left to operate the scheme on the ground. The credit guarantee scheme has not worked. It has been an absolute disaster so much so that the Minister, Deputy Bruton, is due to come back into the House with legislation to change it, yet we are doing the same thing here with the Strategic Banking Corporation of Ireland. We are taking extra money into the market, investing it through the existing banks and expressing a hope that other banks might come and break up the cosy monopoly that exists and make a real difference to Irish business.

That probably will not happen. Deputy Michael McGrath has outlined the way in which the banks are operating and how they will use this cash to balance their books and the additional lending power to save steady businesses. This legislation will result in no changes in the practices that are frustrating businesses and their ability to grow and, more importantly, create employment. It will also not do anything for businesses in substantial arrears. According to the Central Bank, 41% of SME loans are in arrears. This debt is choking the ability of businesses to grow and create employment. It is not possible for them to do so while there is overhanging debt. There is a need to put in place a solution that will allow them to rest some of this debt until such time as they are in a position to start repaying it again. We are not asking for massive debt write-offs. Many viable businesses are being constrained by the debt overhang which is choking their ability to grow and actually pulling some of them down. There are so many examples of businesses affected in this way and this legislation will do nothing for them. It will do nothing to change or improve the lending practices in banks. We all know about the current turnaround time in dealing with bank applications for restructuring and so on. I am dealing with the case of a person whose application for a €500,000 loan has been in the system for 16 months. That is typical of what is happening. However, because of the informality of the system this will not be included in data for bank lending. The banks know that the status of an application is not recorded until such time as it has been refused. The applicant then has the option of appealing the decision to the Credit Review Office or seeking finance under the credit guarantee scheme or from the microfinance fund. However, the Bill will not change the position on banks continuing to stretch out this process.

Another critical issue is that of new products and new ways of lending which facilitate business needs. There is an over-reliance on old traditional banking products such as overdraft facilities. Some 60% of Irish SMEs have access to and use an overdraft facility as their primary source of financing. The European average in this regard is 30%. On the personal guarantee, Mr. Sean O'Sullivan was scathing in his remarks about it in the entrepreneurship report. The Bill will not change that practice. It will not force the banks to recognise that we are living in the 21st century and that they need to offer banking products that are of the 21st century, flexible and respect businesses as customers as opposed to profit-centres for the rebuilding of their profits. Banks have increased fees for business by up to 60% and are being paid ridiculous fees in dealing with loan applications. Presumably, when a particular SME wants to purchase new machinery, it will be faced with huge fees in this regard and a process that may take up to 15 months to complete. There is nothing in the legislation that will stop any of this from happening.

The difficulty is that this has to go through the existing bank structure, in which there is no confidence among Irish SMEs. What is needed is a State enterprise bank in the form of the former ICC or ACC - that is the space we are in - a bank with ambition to assist and grow businesses and go on a journey and walk the walk with Irish business owners in growing their businesses. What is proposed falls short of that requirement. I am at a loss to understand why the legislation is being rushed through when even this model could be improved with a pre-legislative input and an input from business people whom it is supposed to benefit. Those operating SMEs are the ones who need to be involved in this process.

The credit guarantee scheme was launched in October 2012. We were told €400 million in guaranteed lending would arise from the scheme, but nowhere near that amount has been provided. We were also guaranteed funding of approximately €25 million per annum from the microfinance fund, but thus far only approximately €8.5 million has been provided. The decline in lending in the Irish market continues. While businesses are deleveraging less and paying down loans, if, as the Government states, we are in a business development stage, they should be in a position to start growing again, but they are not because the perception among Irish businesses is that Irish banks are not lending. That is the perception of every business organisation and the legislation will not change it. What we need is something that will shake up the cosy consensus in this regard. We need a new type of operation to shake up the banking sector, its product offering, business practices and fee charging structures. That would make a difference and force the existing banks to cop-on and move into the 21st century, thus ensuring the investment in the SBCI might make a difference on the street and to those who want to create additional employment. It will also provide SMEs with the capital they need to grow their businesses. As I stated at the beginning, this is another false dawn, which is regrettable. For the many SME owners looking in who had hoped the legislation would assist them, it will not.

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