Mary White (Fianna Fail) | Oireachtas source

He is very welcome and I congratulate him on his appointment.

Small and medium-size companies are the lifeblood of the Irish economy, representing 70% of all employment, but the recovery of SMEs is being strangled by a lack of access to credit. They also report that bank fees and charges are rising, and the trend is likely to continue.

The decision by Danske Bank to join ACC in winding down its presence in the Irish market was another blow to hopes of real competition in the financial services sector. A former employee in the Central Bank, Fiona Muldoon, said that no institution applied for a banking licence during the time she served in the Central Bank. Just as the Government seeks to attract foreign direct investment in the manufacturing and services sector, the Government must make a concerted effort to get international banks to establish retail and commercial operations here.

While SME lending approval rates are increasing, the level of lending is still very low. The current level of expertise among the Irish banks for dealing with non-property related lending is very low and needs to be increased substantially. That has been going on for the past three years. It has become clear that people in the banks do not understand how to deal with the needs of small and medium-size businesses.

The legacy of debt held by SMEs must also be considered. This was highlighted by media reports that Danske Bank is planning to sell off over €500 million worth of SME loans across 4,000 different customer accounts. Legislative protection must be introduced for SME customers in such circumstances.

Efforts to encourage non-banking funding have been inadequate to date. High profile announcements around seed capital loan guarantees and microfinance have not been matched by the delivery of funding. The credit guarantee scheme is supporting lending at a rate of €1 million a month. It will take 40 years at the current pace to achieve its target of €450 million.

The long-term well-being of the economy requires both effective competition and regulation. The forthcoming report from the Committee of Public Accounts affords an opportunity to put in place a fit for purpose regulatory regime to underpin a competitive market. There is a need to protect SMEs whose loans are sold by departing banks to vulture funds.

It is five years since the onset of the banking crisis and the Irish banking sector is still not fit for purpose. It is imperative that the Government brings forward a White Paper on a strategy for competition and regulation and not simply react to each development. There is clearly a lack of competition but I do not have time to go into that.

The Minister referred to the establishment of the Strategic Banking Corporation of Ireland. Anyone who understands the situation knows that this a half-hearted effort to tackle the problem of access to credit for small and medium-size enterprises.

The Minister of State spoke glowingly about it but it is well known this is only a half-hearted effort. It falls well short of what is needed by the SME sector.

The establishment of the Strategic Banking Corporation of Ireland, SBCI, was long over due. It was promised as part of the programme for Government more than three and a half years ago and it will be several more months before it starts lending. However, even though it is called the Strategic Banking Corporation of Ireland, it will not have a banking licence, instead it will provide funding to existing banks who will lend on to SMEs. It is farcical that the credit decision will still remain in the hands of the existing banks.

I would like to speak about Sparkassen Bank in Germany. It is one of a number of banks in Germany. It was set up 200 years ago and it has 400 outlets around Germany. It was deliberately set up to provide services for people who are less well off in the German economy. People were fleeing rural areas and moving to the towns and the Germans wanted to support people who wanted to remain engaged in agriculture. The bank provided for small farmers, small business people and people who were not well off. We are missing a big opportunity here in that we are not doing something similar with our post offices and credit unions. The networks of credit unions and post offices could be turned into a facility such as the German Sparkassen Bank to serve local communities, rather than our relying on the two pillar banks that have not changed a whit. I wish the Minister of State every luck in his role.