Damien English (Meath West, Fine Gael) | Oireachtas source

I again thank the Deputy for the amendment which again we cannot take on board. I hate saying we will oppose it when we are explaining why we cannot take it on board under the existing rules. It is a formality that we have to oppose it, I am afraid.

We oppose this amendment. The aforementioned notification of the scheme to the European Commission is based on a state-guaranteed loan scheme. Interest-free coverage is a different type of scheme under the framework and not permitted under this scheme. It would require a different premium and would have more onerous state aid implications for the businesses. As a premium is required to be paid quarterly by the business to cover the guarantee by the State, if no payments were made over 12 months, the guarantee would not stand. This would result in the end user having worse terms and conditions, including collateral and personal guarantee requirements, and interest rates. We believe that having the scheme will lead to greater availability of credit and loans because they are divested on behalf of the banks. The requirement to have collateral up to a certain level would be eliminated by having this scheme as well as reducing interest rates. It is important to have this scheme and to work within the existing rules.

The Credit Guarantee Act has facilitated a number of schemes, including the standard credit guarantee scheme, the Covid-19 scheme and now the Ukraine credit guarantee scheme. None of these credit guarantee schemes have utilised a cap in the interest rate. This is because the bilateral agreement is decided on an individual basis between the Minister for Enterprise, Trade and Employment and the finance provider. The legislation does not set out a cap, but this allows for a level of flexibility. The scheme and the temporary crisis framework demand that as a result of the guarantee the interest rate is demonstrably reduced from market rates. I addressed that on Second Stage. There will be a reduction on market rates. That is required to be in the scheme and that has proven to be the case on the schemes in the various iterations previously used on this legislation as well. This will be evident to the business in the loan documentation. We monitor and track that. The State is involved in this loan process and we will certainly keep an eye on that.

Larger banks tend to provide standard term loans with a considerable reduction in interest rate. However, smaller non-banks, including credit unions, would not be able to meet the proposed cap. They will provide a reduction as required but could not go to the level proposed. I want to see a strong level of competition in the range of finance providers participating in the scheme and not having a cap will facilitate this competition because the cap would exclude certain providers. Competition is important because these smaller lenders provide different types of lending, including asset-backed financing such as hire-purchase and discount invoicing. In addition, they might be the lender of choice for some of the businesses we intend to help here. This competition is important for the market but more so for the businesses as they can choose the lender that suits them.

Pre-eligibility will now be assessed by the Strategic Bank Corporation of Ireland. Following approval, they can go to any participating lender. We hope to have a number of lenders involved in the scheme. The initial offering will probably be through one or two to get it out quickly before Christmas and then it will be open to all the existing people using this scheme and others to come forward and bid for some quota here as well. In the interest of competition, it is important not to have a cap.

See this speech in context