Peter Mathews (Dublin South, Independent) | Oireachtas source

From reading the Bill and the one-page diagrammatic aid circulated to Members at the beginning of Second Stage, I am of the view that the intentions here are very clear. Whether they are adequate in terms of what is needed and answer the question as to where the economy stands in the context of SMEs is another matter entirely. The strategic banking corporation of Ireland will essentially be a wholesale bank that will lend to existing banking institutions and any new entrants to the market. The risk relating to the moneys that will be on-lent to SMEs will be carried by the direct-lending entities, namely, those existing institutions and any new entrants. Deputy Michael McGrath's point to the effect that the security the banks hold at present in respect of existing loans, legacy loans and the banjaxed loans that are weighing down on SMEs is compromised is well made. The appetite on the part of the banks to lend to SMEs is going to be dulled by that compromised security. They will not want to ascribe to the new funds better security than that which applies in the context of legacy debt. This will cause a problem and it brings me back to the point that the blackboard must be cleaned before any new sums are written on it. In other words, the position with regard to mortgages and SME legacy loans must be addressed expeditiously.

As I have already stated, my comments are constructive in nature. I am all in favour of the sort of bank being established under the legislation. ICC bank, for which I worked, was that kind of institution, but it lent directly. ICC obtained its funds mostly from its customers but also from the EIB in the case of ten-year funds with fixed interest rates. That was how it was designed. The trouble with what is proposed in the Bill is that the Minister is trying to straddle two moving platforms. On one hand are the banks, which have poor operational experience with their customers and which are trying to deal with the new requirements of those customers, and on the other is the new funding coming from new wholesale funders through those banks. It is a very wobbly arrangement. I am only being realistic. The Minister must be of the view that my comments are very negatively charged. That is not the case. They are realistic and they need to be taken on board.

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