Martin Ferris (Kerry North, Sinn Fein)
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Question 48: To ask the Minister for Finance his views on the Mazars review of lending to small and medium-sized enterprise in the final quarter of 2009 which showed that SME lending was down by 3.6% in the year; when Bank of Ireland is required to submit its SME lending plan to his Department, as required under the terms of recapitalisation of the institution; if this lending plan will be presented to the Houses of the Oireachtas; when AIB and Bank of Ireland plan to start making the €3 billion in credit facilities, as required under the recapitalisation plan, available to small and medium-sized enterprises; and if he will make a statement on the matter. [17098/10]

Seán Sherlock (Cork East, Labour)
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Question 75: To ask the Minister for Finance if he will comment on the most recent Mazars review of lending to small and medium-sized enterprise; and if he will make a statement on the matter. [17219/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 48 and 75 together.

I consider it important to examine the overall picture in regard to credit for small and medium-sized enterprises, including positive aspects, and not to focus solely on negative aspects of the report. The third Mazars report on lending to small and medium-sized enterprises, which covers the period from October to December 2009, showed that credit applications in number and value terms rose slightly in the last quarter of 2009 over the previous quarter, which is encouraging. The level of applications for credit appear to be stabilising and Mazars also reported a small improvement in the overall credit approval rate.

However, the reduction in the stock of credit, as repayments exceed new credit, and in credit quality reported by the banks remains a concern for the Government. To address this concern, I announced earlier this month that AIB and Bank of Ireland are to make available a minimum of €3 billion each for new or increased credit facilities, including working capital targeted at small and medium-sized enterprises, in the real economy in each of the next two years. A letter was sent to Bank of Ireland and AIB on 7 April requiring them to prepare a small and medium-sized enterprise lending plan, broken down by sector and geography, for submission to my Department by 12 May. Both banks are expected to make the credit available immediately and should not wait until the plans are submitted.

The recently established credit review office is available to review banks' decisions to refuse credit to businesses. It will provide an independent opinion of the banks' decisions on whether the credit should have been granted or not. It is possible that the existence of the office could have an effect on the banks' behaviour in regard to credit. Businesses can also seek a review of a decision to reduce or withdraw credit. This should resolve the contentious issue of whether the banks are willing to lend to viable businesses.

I have taken a number of other actions to assist the credit situation regarding small and medium-sized enterprises. The two largest banks are required to provide €20 million each for seed capital to Enterprise Ireland supported projects. They must each set up a €100 million fund for environmental, clean energy and innovation projects. In addition, the banks are required to commit to working with Enterprise Ireland and the IBF to develop sectoral expertise in the modern growth sectors, to explore with Enterprise Ireland and the IBF how best to develop the range of banking services that Irish small and medium-sized enterprises trading internationally will need. They are also required to develop expertise and credit products in areas where cashflow rather than assets is the basis for lending.

Brendan Howlin (Wexford, Labour)
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We will roll the questions together, if people will agree to that.

Arthur Morgan (Louth, Sinn Fein)
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I thank the Minister for his reply. How rigorously will the banks' lending practices be scrutinised by Government to ensure that they are meeting their obligations and commitments? Is the Minister aware of another problem which is about to occur regarding lending by banks? The chief executive officer of Bank of Ireland, Mr. Richie Boucher, pronounced earlier this week that Bank of Ireland will raise interest rates for mortgage and business lending. Does the Minister share my concern that some of these banks may be prohibitively expensive in terms of their lending and that we are back to square one?

Joan Burton (Dublin West, Labour)
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On the €3 billion, what is the situation regarding banks which are refusing to renew guarantees or rolling over existing lending facilities and describing that as new? How will that be identified and assessed?

Kieran O'Donnell (Limerick East, Fine Gael)
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Is the Minister aware that none of the three Mazars reports gives a breakdown? They are inadequate because they give no breakdown between new and existing lending, and between overdrafts and long-term loans. It is incredible that the banks are unable to provide that level of breakdown. It is clear there is a cover up because they are not willing to provide that level of breakdown.

Richard Bruton (Dublin North Central, Fine Gael)
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Did the Minister note the figure in the Mazars report that lending to performing loans for small businesses was down by 25%? It an extraordinary squeeze on performing businesses which are the lifeblood of recovery. Has the Minister done any preparation on how he might frame credit directives, a power which he took in the legislation, if that becomes necessary?

Brendan Howlin (Wexford, Labour)
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I apologise for rolling all the questions together.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I thank the Leas-Cheann Comhairle. In a sense, Mazars has been superseded by the appointment of Mr. John Trethowan and the focus of the discussion was on Mazars. He is now engaged in his work and will be in a position to advise me on drawing up the type of regulation to which Deputy Bruton referred.

On the rolling over of arrangements and guarantees, I made it very clear in my statement on banking before Easter that the €3 billion is expected to relate predominantly to working capital and it is not excluded. It is not a matter of new lending. One of the difficulties has been that the banks have suggested, as Mazars has identified, that they are willing to give new lending. One of the core difficulties has been working capital, as the Deputy has consistently identified, and Mr. Trethowan is well aware of that.

I apologise to Deputy Morgan; the question is in the name of Deputy Ferris. What was the question?

Arthur Morgan (Louth, Sinn Fein)
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My question was on the concerns regarding the banks increasing their lending rates to business to such an extent that it would be unaffordable. Can or will the Minister do anything about that in the event that it occurs?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There is very little we can do about that because the markets determine the rate at which we buy and sell money. I am confident that the measures begin taken at the European Central Bank will stabilise interest rates and prevent their undue increase.