Pearse Doherty (Donegal South West, Sinn Fein) | Oireachtas source

What the Minister referred to in his last contribution does not exist in legislation because the company has not yet been established and there is no requirement on the on-lenders to inform the SBCI how they are on-lending the money they are getting from it. We are speaking about a company that is being established to lend money to a bank which is regulated by the Central Bank and will lend vast amounts of money to customers throughout the country and in other jurisdictions. This money will be sizeable in amount but only a small fraction of the overall lending of the larger institutions.

The problem is that although the banks may be contractually bound to report to the company demonstrating the funds they accessed were lent to X, Y and Z in the SME sector, this arrangement may not work unless there is an institution with an overall picture of what is occurring. We have seen the unfortunate behaviour of some financial institutions that twist, bend and contort the rules to ensure the arrangement is in their own financial interest. Therefore, the appropriate agency to ensure oversight and ensure the spirit of this legislation is being adhered to is the Central Bank. It is only the latter that will have the potential to gain access to all the information. For example, it could ascertain that a product developed by the SBCI is not just supplementing lending already taking place within a bank. Perhaps the Minister's intention is that the company will just provide cheaper credit and not more credit to the SMEs such that those availing of credit today might be able to avail of different forms of credit, with different term loans and at cheaper rate. This would be a failure considering the aims of the legislation. Not only should different types of credit be available through different products - the Minister mentioned some of them, including holiday payments, longer durations and cheaper credit - but more credit should be available for SMEs. The company itself will not be able to adjudicate on that. Only the Central Bank of Ireland will be able to determine whether all of the funds made available by the company to a financial institution have been lent to SMEs. It would be able to determine, for example, that 50% of the funding replaced existing funds lent to SMEs and thus did not increase the flow of funding. A broader approach is needed involving the Central Bank in some way. I am not sure what the phraseology should be in the legislation, but the Central Bank should have a role. I do not trust the banks and I believe we have enough evidence to show that when rules are applied, it is the job of some of the very senior staff in banks to discover how to comply with them in a way that maximises profit or, at least, minimises the loss of profit to the bank. Therefore, the banks may comply with the letter of the law but not the spirit. That is why we need an adjudicator that can see around the corners that the company will not be able to see around.

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