Kieran O'Donnell (Limerick East, Fine Gael)
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Question 57: To ask the Minister for Finance if he has data available to him on the trends in business credit since the bank guarantee in September 2008; and if he will make a statement on the matter. [19126/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Data on business credit are available to me from a number of sources including the Central Bank and the Financial Regulator. Returns are also made by institutions covered under the guarantee scheme. From the available reports it is clear there has been some reduction in business credit. The most recent Central Bank monthly statistics show a reduction in total credit outstanding from non-financial corporate bodies of €1.3 billion in March 2009, compared with February 2009.

However, the cause of the reduction in business credit is not clear. Some reports state that customers with viable business propositions are being refused credit, while other reports suggest that falling demand for credit is the main cause of reduced credit flow. It is important that there should be a clear understanding of the basis for the slow down in business lending so that policies can be targeted to ensure that necessary corrective actions are taken, as required. The Government therefore decided, when it announced the recapitalisation of the banks in February, that there should be an independent review of bank lending.

As part of the recapitalisation package, Bank of Ireland and AIB agreed to fund an independent review on credit availability to SMEs in Ireland. The review is supervised by a steering committee consisting of representatives from the banks, the business sector and the public sector. Consultants have been appointed and have commenced their work. I expect that the result of the review will provide a clear picture of credit demand and credit availability to businesses and will identify ways to improve the flow of credit. The report on the review is expected at the end of June.

Kieran O'Donnell (Limerick East, Fine Gael)
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The recapitalisation and bank guarantee schemes were brought forward primarily to ensure funds would flow to small business, as well as to deal with the banks. The Minister gave a commitment to the House on 26 March that a report would be quickly brought forward on the issue of credit flowing to small business and oversight in terms of declined cases. Why is there no urgency in bringing the report before the House? When will it be brought before it? Furthermore, the figures the Minister is quoting as regards the Central Bank are grossly inadequate. Since last September we have seen declines in private sector credit of the order of nearly €8 billion. The Minister speaks of credit flowing to small business and the Opposition coming forward with alternative proposals, aside from the establishment of NAMA. We brought forward a motion last night on Private Members' business on the establishment of a State-sponsored wholesale bank to borrow funds from the ECB and provide them for existing banks for good loans, effectively taking ownership of the assets. Will the Minister take this on board in terms of providing credit for small business and mortgage holders?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I shall consider the matter when Fine Gael outlines its proposals in relation to bad loans because the availability of EU funding through the European Central Bank would be contingent on this. When there is a scoped proposal, I shall examine it.

As regards the review, it is progressing well, but to ensure it was comprehensive extra steps were taken, including the inclusion of banks other than those recapitalised, in order to obtain a full picture of overall credit availability. This is a vital question because all the evidence suggests those banks with external ownership are deleveraging more than those based in Ireland. The addition of extra third parties to the review, a review of the detailed terms of engagement of the consultants, the inclusion of a credit insurance issue, consideration of confidentiality concerns of participating banks and the inclusion of banks other than the recapitalised banks to obtain a full picture of overall credit availability were vital. Allied Irish Banks and the Bank of Ireland had committed to the review as part of the recapitalisation package. Other banks, including Ulster Bank, Bank of Scotland (Ireland), NIB, ACC, Anglo Irish Bank and KBC, were invited to participate, even though they had not made a commitment to become involved. The intention was to include the main banks involved in lending to businesses in Ireland, but their inclusion created a need for more formalised conditions attaching to the review. Some of the banks involved had head offices outside Ireland and were obliged to consult their parent companies about participation in the review. Publication of the review will be at the end of June.

Kieran O'Donnell (Limerick East, Fine Gael)
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This sounds like a slow bicycle race, as if the Minister is stalling. He gave a commitment on the floor of the House last March to the effect that he would bring forward such a report. We expect him to honour that commitment.

As regards Fine Gael dealing with toxic loans, we proposed a detailed review needed to be carried out and brought to the House within a period of six weeks which would look at the details in dealing with all the providers of capital, including bond holders, who are not getting full value in the market. We have brought forward a comprehensive proposal which we hope the Minister will take on board. Unlike his proposal, ours would lead to the provision of credit for small business. When is the Minister going to produce the report and what is the reason for the delay? Why is publication to be at the end of June, not now?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The report is not ready because of the inclusion of all the banks in the Irish picture. It will be ready by the end of June.