Dáil debates
Tuesday, 9 March 2010
Priority Questions
Banking Policy.
3:00 pm
Leo Varadkar (Dublin West, Fine Gael)
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Question 43: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if she is satisfied that the banks and other financial institutions are making sufficient credit, new loans and working capital available to business; and if she will make a statement on the matter. [11670/10]
Mary Coughlan (Donegal South West, Fianna Fail)
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The central objective for Government is the provision of normal credit on fair commercial terms in our economy to all viable large, medium and small businesses. It is critical that our banking system is again fully fit for purpose, whether in providing working capital, new loans or other credit facilities to businesses. The relationship between banks and businesses needs to be fully restored, and built on trust and economic and business realism. There is no doubt that banks are making significant credit available to businesses, albeit in the context of a decline in demand for credit against a background of slower economic activity. The independent reviews of bank lending carried out by Mazars show clearly there are reductions in lending volumes going to businesses. Against that, we are all well aware of the demands from businesses for greater access to bank credit, in particular for working capital needs.
The Government has taken a range of actions to sustain the banks and facilitate the flow of credit to the wider economy. The bank guarantee scheme, the bank recapitalisation scheme, the nationalisation of Anglo Irish Bank and the massive effort we have put into the entire NAMA process all have the single purpose of getting our banking sector supporting the wider economy. As the Taoiseach has already announced, the Government's plans to restructure the banking sector are imminent and will be announced over the coming weeks. Further recapitalisation of the banks may feature as part of these plans.
The Minister for Finance, Deputy Brian Lenihan, will issue guidelines shortly in order to ensure that businesses will have recourse to an independent external review of decisions of credit refusal by the NAMA participating banks. It is hoped that banks not participating in NAMA or covered by the Government guarantee will also decide to join the system. The aim is to have a simple, effective review process, run by people with experience and credibility. The banks must comply with the recommendations of the review process or explain why they will not do so. In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help to determine what further action might be necessary to secure the flow of credit. The Minister for Finance, Deputy Lenihan, intends to publish the analysis from the review process in order that the performance of the banks participating in NAMA will be clear to all.
Within my own Department, the enterprise development agencies such as Enterprise Ireland, FÁS and the county and city enterprise boards have continued to assist enterprises through their grant and advisory schemes. Significant allocations were made in my Department's Estimates for 2009 and 2010 to sustain the work of these agencies. The enterprise stabilisation fund and the employment subsidy scheme are additional measures to make funding available to assist SMEs through their current difficulties.
Leo Varadkar (Dublin West, Fine Gael)
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Sometimes I think the Tánaiste and I do not live in the same country. I heard her reply, in which she said there is no doubt banks are making significant capital and credit available to businesses. That is just not true. I wonder whether she is spending too much time doing the clinic of Pat The Cope Gallagher in her constituency, rather than talking to business people about the realities of what is going on. Businesses are being starved of credit and, in particular, are being starved of working capital. Every business will not survive this recession but what I cannot tolerate is seeing viable and potentially viable businesses go to the wall because they cannot get credit and working capital because their overdrafts are being turned into loans.
It seems we have been talking about this for I do not know how long. It is nearly two years since the bank guarantee and since the Minister, Deputy Brian Lenihan, promised us that credit would be extended to business and that there would be a wall of cash coming at us, to use his own words.
Leo Varadkar (Dublin West, Fine Gael)
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Will the Tánaiste do something about this? Will she introduce an enterprise finance guarantee, as has been done in the United Kingdom, to ensure credit is extended to business again? If she will not do that, will she at least consider establishing a new bank, a national recovery bank, as Fine Gael has suggested to ensure these zombie banks are not relied on to provide credit when we can have a new bank that will do so?
Mary Coughlan (Donegal South West, Fianna Fail)
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It is not the intention to do so. On the issue of access to credit, it is important to make several points. First, the Minister of State, Deputy Billy Kelleher, on my behalf travelled the entire country listening to businesses, particularly small businesses, to find the particular issues. Second, we set up a review group comprising all of the key stakeholders and all of the banks. The Deputy might roll his eyes but-----
Leo Varadkar (Dublin West, Fine Gael)
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The Tánaiste is always setting up groups for stakeholders and all of that.
Mary Coughlan (Donegal South West, Fianna Fail)
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It really helps to bring people together to ensure that they appreciate the other sides of the argument and how they can work together instead of being adversaries. Third, Enterprise Ireland facilitated the transfer of some personnel between the banks to ensure the experience and expertise on business and business decisions would be made available. That has happened and is ongoing. Fourth, we introduced the Mazars report and, following on from that, a further Mazars report.
Following on from that, it is important to make several points. On my behalf, Forfás, my Department and Enterprise Ireland are examining the potential of a loan guarantee scheme. We are working very closely with the Minister for Finance and his Department to ensure that, in the context of further work within the banking system, access to working capital for businesses will be to the forefront of that decision making. In the context of the European 2020 programme, access to working capital and venture capital is very important and one of the key drivers of many discussions that are taking place at EU level. I will pursue this vigorously and we will continue to be vociferous in seeking to ensure fairness and equity in supporting business.
Leo Varadkar (Dublin West, Fine Gael)
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This is all process. We know this Government is great at process. There are review groups, research papers, committees and task forces which all get together and write another report. We are sick to death of process. It is now two years since the bank guarantee and what we need is action. When will the Minister act on this issue and make a decision on whether there will be a loan guarantee for small business.
Mary Coughlan (Donegal South West, Fianna Fail)
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As was said to the Deputy's party leader on several occasions by the Taoiseach, if the Deputy's party was on this side of the House, we would not have any banking facilities because we would have no banks.
Leo Varadkar (Dublin West, Fine Gael)
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We have no banks. They are zombies to which the Government gave €11 billion to lend no money.
Mary Coughlan (Donegal South West, Fianna Fail)
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The differences between Fine Gael and the Labour Party are striking. The one thing we have is a plan, that plan is NAMA, we are working on its development and working out that system to ensure we have access to credit and that we deal with the viability of the banking system. We are working towards examining the potential of a loan guarantee scheme.
Leo Varadkar (Dublin West, Fine Gael)
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Working towards examining.
Mary Coughlan (Donegal South West, Fianna Fail)
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It is easy to sit over there.
Mary Coughlan (Donegal South West, Fianna Fail)
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Let us hear all about the Fine Gael magic bank, that monument to Deputy Enda Kenny-----
Mary Coughlan (Donegal South West, Fianna Fail)
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-----where we will bring all of the organisations together, create one huge monolithic God knows what, to ensure-----
Damien English (Meath West, Fine Gael)
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Has the Tánaiste read the policy?
Conor Lenihan (Dublin South West, Fianna Fail)
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George read it and he got out.
Mary Coughlan (Donegal South West, Fianna Fail)
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Exactly. At least to be fair to him, he realised it is not workable and will not create any more jobs.
Damien English (Meath West, Fine Gael)
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It is too complicated for the Tánaiste.
Brendan Howlin (Wexford, Labour)
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We must move on to the next question.
Mary Coughlan (Donegal South West, Fianna Fail)
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The Deputy is the very one who came to this House to discuss quangos. He wants to create the biggest quango that was ever created in the history of this State through the development of what he wanted to do on the creation of jobs.
Damien English (Meath West, Fine Gael)
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It is not a quango. It is a commercially driven State body. The Tánaiste should cop herself on. This is the Tánaiste trying to dismiss the idea.
Conor Lenihan (Dublin South West, Fianna Fail)
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So is Garret Fitzgerald.
Damien English (Meath West, Fine Gael)
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I am fed up listening to this. It is a stupid argument. It is quite simple to read it. It is in black and white.
Brendan Howlin (Wexford, Labour)
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If the Deputy is fed up listening, perhaps he should find something else to do. This is a House of Parliament. Please allow Members to speak. I call Question No. 44.