Trevor Sargent (Dublin North, Green Party)

Gabhaim buíochas leis an Seanadóir as ucht seans a thabhairt dom labhairt ar an rún atá os ár gcomhair. I welcome the opportunity provided by the debate on this motion to outline for Senators the extent and range of initiatives being taken by the Government to increase the flow of credit to the community sector, to small and medium sized enterprises and in the area of social finance. In light of the extent and range of measures put in place, I will deal with this in three broad areas: measures to get credit flowing to enterprises, credit unions and social finance.

In acting resolutely to ensure the continued functioning of the banking sector in this economy, the Government has focussed directly on the access to credit by small and medium enterprises. As part of the recapitalisation package announced in February, Allied Irish Banks and Bank of Ireland reconfirmed their earlier commitment to increase lending capacity to small and medium enterprises by 10% and to provide an additional 30% capacity for lending to first-time buyers in 2009. The banks have committed to public campaigns to actively promote their lending to these sectors. If the mortgage lending is not taken up, then the extra capacity will be available to small and medium enterprises. Compliance with this commitment will be monitored by the Financial Regulator. These banks have also committed to public campaigns actively to promote small business lending at competitive rates with increased transparency on the criteria to be met. The banks will make quarterly reports to the Financial Regulator, with the first report to end March 2009 to be submitted by end April 2009.

There have been reports that customers with viable business propositions are being refused credit, but there are also reports to suggest that falling demand for credit is the main cause of reduced credit flow. Notwithstanding these conflicting positions, a perception of limited credit availability can be damaging at this time of fragile business and consumer confidence. An accurate assessment of the situation is vital and the Government has therefore decided there should be an independent review of bank lending to report within a short timeframe. The banks have undertaken to co-operate fully with this review and to engage constructively in implementing any recommendations made. The appointment of independent consultants to conduct this review is imminent.

The recapitalised banks have also agreed to engage in a clearing group chaired by a Government representative and including representation from business interests and State agencies. The purpose of this group will be to identify specific patterns of events or cases where the flow of credit to viable businesses appears to be blocked and to seek to identify credit supply solutions.

In addition, a statutory code of conduct for business lending to small and medium enterprises was published by the Financial Regulator on 13 February. This code will apply to all regulated banks and building societies. It will facilitate access to credit, promote fairness and transparency, and ensure that banks will assist borrowers in meeting their obligations, or otherwise deal with an arrears situation in an orderly and appropriate manner. The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulty, the banks will give the customer reasonable time and seek to agree an approach to resolve problems and to provide appropriate advice.

Accessing seed finance for start-ups is critical for continuous economic development. Companies developing new products and services tend to make significant expenditure on research and development and have the potential to create significant new employment, particularly for graduates. Building on the banks' commitment to the indigenous venture sector, Allied Irish Banks and Bank of Ireland are both committing a further €15 million each to new or existing seed capital funds, in collaboration with Enterprise Ireland's seed and venture capital programme. The banks' funding will be matched, as appropriate, by funding under Enterprise Ireland's seed and venture capital programme and/or by funding from other national or international investors.

The recapitalised banks have confirmed they have each established, or are about to introduce, a €100 million fund to support environmentally friendly investment and innovations in clean energy. One of the recapitalised banks has already launched a €100 million fund to support the financing of Irish based renewable energy projects and plans further initiatives in this area.

Prompt payment is important to underpin cash flow, particularly for small businesses. The recapitalised banks have committed to prompt payment arrangements in future customer contracts, which will involve payment within 30 days and a late payment interest charge on any payments made after 30 days.

The Government is confident the measures I have outlined will support the flow of credit to small and medium enterprises, which is of course critical to continued economic development in Ireland.

I will turn to the issue of credit unions. The Government places immense value on the important role that credit unions play in Ireland. The continued success and growth of the movement in recent years stand as a testament both to the trust and loyalty felt by its members, and the dedication and commitment of all credit union staff, both professional and volunteer. Even with an increasingly wider range of financial service providers to choose from, due to their not-for-profit and co-operative nature, credit unions are still seen as the natural choice in many communities for people to save with and borrow from.

The Credit Union Act 1997 provides the legal framework for the regulation of credit unions. Within this framework the registrar of credit unions, within the Office of the Financial Regulator, is responsible for the operation of the regulatory and supervisory regime for credit unions. The Act was designed to provide the credit union movement with a regulatory structure that reflected and promoted the particular ethos and philosophy of the credit union movement, its strong tradition of volunteer service and the core objective of providing opportunities for saving and lending for members of credit unions.

The Credit Union Act has provided the legal and regulatory framework within which the credit union movement in Ireland has continued to grow and develop over recent years. The growth in assets of credit unions, largely comprising members' savings, highlights the continued success of credit unions in meeting the financial needs of local communities and occupational groups falling within the common bond.

The rules-based approach to regulation embodied in the Credit Union Act has served the credit union movement well by providing clarity and certainty to individual credit unions, their directors and members. It has helped to support the continued stability of the credit union movement and safeguard members' savings during a period of rapid growth. The Act provides some discretion to the registrar of credit unions to issue regulatory directions to individual credit unions in these matters.

The amendment to the motion claims the regulator has no effective power against non-compliance. As far as the points on regulation in the amendment are concerned, it is important to point out that the registrar of credit unions is responsible for the regulation and supervision of credit unions under the powers of the Credit Union Act 1997. This rules-based legislation provides extensive powers of direction to the registrar to ensure the financial soundness and safety of credit unions and to protect credit union savers.