Willie Penrose (Longford-Westmeath, Labour)
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Question 32: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to the recent report published by ISME which found that 50% of firms surveyed had applied for credit and had been refused by their banks; the steps she is taking to address this situation; and if she will make a statement on the matter. [27643/09]

Billy Kelleher (Cork North Central, Fianna Fail)
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I am aware of various surveys carried out by ISME. The results of individual surveys from the enterprise and banking sectors can be useful in highlighting the generality of the credit supply issue but they must all be examined in the context in which they are carried out and the methodologies applied.

The banks' recapitalisation package was about securing the long-term health of the economy and about enabling our banks to get back to the business of lending to viable projects and about saving jobs. The package includes many supports for small and medium enterprises, SMEs. The recapitalised banks have committed to increasing their lending capacity to SMEs by 10% over 2008. This should ensure that sound businesses will receive support from their banks. A €100 million environmental and clean energy innovation fund is also being established by each bank as well as a further €15 million each to new or existing seed capital funds. Much of this funding will flow to small and medium enterprises. SMEs are also covered by the code of conduct on business lending to SMEs. This code which was published by the Financial Regulator came into effect from 13 March 2009. The application of the code will promote fairness and transparency in the treatment of SMEs by the banks and should facilitate access to credit for sustainable and productive business propositions. Allied Irish Bank, Bank of Ireland and Ulster Bank will also provide funding for SMEs on foot of €300 million facilities provided by the European Investment Bank to assist developing SMEs.

The recapitalised banks agreed to pay for and co-operate with the carrying out of an independent review of bank lending to SMEs. Additional banks have now participated in this review with the result that the five major lending banks are now included. The purpose of the review is to ascertain the position on credit availability to SMEs here and to recommend appropriate action to improve credit availability. The independent review has now been submitted to my colleague, the Minister for Finance, and will be published shortly. I welcome the completion of this review as it should allow all stakeholders an objective view of the state of lending from the banks to SMEs and provide some clarity on the level of credit being declined.

Arising from the recapitalisation package, the Tánaiste, along with my colleague the Minister for Finance, also established a credit supply clearing group with bank, business (including ISME and SFA) and State representation.

Willie Penrose (Longford-Westmeath, Labour)
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The Minister of State will note that the focus of this question is jobs. It is important that money flows to create new jobs and to sustain and retain existing jobs.

Ordinary people and owners of small businesses are saying banks are running rings round the Government. They got huge funding for recapitalisation with no lending conditions attached. There is a credit famine which knows no bounds. Overdraft facilities are being withdrawn or renegotiated, loans are not being given or are given with huge conditions attached. Additional security is demanded and punitive charges imposed. Is the Minister of State concerned that banks are refusing to lend to 50% of small firm applicants and of the impact this credit famine is having on small businesses?

The Minister of State and the Tánaiste doubted the ISME survey. I will bring them up to date. Does the Minister of State also doubt the county enterprise survey? Mr. Michael Tunney, chairperson of the CEB network says, "If the situation continues many good businesses will be forced to close as a result".

The number in receivership in the first half of the year has quadrupled. Some 523 companies are involved in liquidation, the highest since records began. Business closures outnumber formations for the first time since 2003. The Minister of State may doubt the ISME survey. Does he also doubt the county and city enterprise boards, which relay these figures to the Minister of State's Department?

The Minister of State launched a credit evaluation programme in Cork on 29 June. What did he hear from that programme which is inconsistent with what ISME and the CEB is telling him? What is going on? Why will the Minister of State not tell banks to release credit to businesses which need it.

Billy Kelleher (Cork North Central, Fianna Fail)
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I am well aware of the survey. Mr. Mark Fielding, CEO of ESME attended one of the seminars I held in Dublin to discuss the whole issue. I have also met the county enterprise boards and chambers of commerce throughout the country. We invited regional bank representatives and the representatives of broader industry from farming to the chambers of commerce to the seven meetings to date.

I have an in-depth knowledge of the difficulties facing small and medium-sized businesses, SMEs, but we must put such matters in context. The most important decision to provide credit to SMEs was the bank guarantee of 30 September 2008, which was intended to stabilise financial institutions. Subsequently, we recapitalised the two main banks and nationalised Anglo Irish Bank. In light of the recapitalisation, we introduced a code of conduct in respect of lending to SMEs whereby the banks are obliged to have a capacity 10% greater than their 2008 lending figures.

We are conscious of the SMEs' difficulties in accessing credit, but there is a fundamental issue that we should discuss at a later date, that is, normal lending practices stopped some years ago. This is a fact. Credit was generously and easily handed out. SMEs must now submit projections and cash flow plans whereas submitting audited accounts to managers used to be sufficient to receive extra credit facilities. There is a tightening, but we must ensure we can wean the country from excessive lending practices to sustainable practices and that, in the meantime, SMEs are not hurt. With most of these exercises, the Government and every Deputy present have one purpose in mind, that is, the retention and protection of jobs.

Willie Penrose (Longford-Westmeath, Labour)
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Absolutely. We can concur on that objective, but I want to ask a related question. Into what black hole did the €350 million that was to be made available by the European Investment Bank, EIB, disappear? It does not appear to be going where it was intended or was Mr. Fielding out of date when he stated that some banks were ignoring EIB funds for SMEs, that two thirds of bank staff had no knowledge of those funds and that many of them did not know what was the SME lending code? Are the rescued banks snubbing the Government? Now that they have the capital, are they trying to run the show their way on the basis that, even though the State was fairly good to them, that was nine months ago whereas they are now where they want to be and will tighten up the rules, thereby letting businesses go to the wall?

This is a matter of jobs. Thousands of jobs are being lost in the retail, manufacturing and technology sectors. Every sector, including hotels, is being hit by this situation. Why are the banks not lending the promised €350 million to SMEs at reduced interest rates?

Billy Kelleher (Cork North Central, Fianna Fail)
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As I stated at the outset, ISME's survey was useful in that context. Mr. Fielding raised this issue at one of our seminars and the banks gave an undertaking they would re-advertise through their staff or inform their staff of the importance of the EIB's funding. The major banks have drawn down the funding. It is not for normal credit and short-term working capital, as criteria apply. It is for long-term working capital and liquidity purposes. The major banks were in discussions with the EIB. At a fine meeting this morning in Athlone in the Deputy's county, I met some people who spoke highly of him-----

Willie Penrose (Longford-Westmeath, Labour)
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I am glad to hear that.

Billy Kelleher (Cork North Central, Fianna Fail)
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-----and other Deputies.

Willie Penrose (Longford-Westmeath, Labour)
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I know that, too.

Billy Kelleher (Cork North Central, Fianna Fail)
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The EIB's money will begin to flow into businesses quickly. The banks took on board views expressed at the regional seminars and in ISME's survey and undertook to educate their staff regarding the EIB's funding.