Seanad debates

Tuesday, 13 February 2018

Commencement Matters

Community Banking

2:30 pm

Photo of Michael D'ArcyMichael D'Arcy (Wexford, Fine Gael) | Oireachtas source

As Senator Conway is aware, the Departments of Finance and Rural and Community Development are responsible for fulfilling the commitment in A Programme for a Partnership Government to "thoroughly investigate the German Sparkassen model for the development of local public banks that operate within well-defined regions".

Under the local public banking model, a state or another public body has ownership of a financial institution. Local public banks in Germany, which are called Sparkassen, are not permitted to operate outside specific geographic regions. Their aim is not to maximise profits but to promote economic development and financial inclusion in the regional areas in which they operate. Additionally, the business model of Sparkasseninvolves building close relationships with local small and medium-sized enterprises, SMEs.

Officials in the Department of Finance have been working closely with their colleagues in the Department of Community and Rural Development. Their investigation of local public banking has consisted of a consultation process with stakeholders and interested parties, including the credit union movement and An Post. They have analysed a detailed proposal on the Sparkassenmodel and its possible implementation in Ireland that was put forward by Irish Rural Link and the Savings Banks Foundation for International Cooperation, SBFIC, which is the international development wing of the Sparkassengroup. Officials in the Department of Finance have had a number of meetings with representatives of Irish Rural Link and the SBFIC. Officials from both Departments have prepared a report on the findings of their investigation. The report is being reviewed and considered by the Ministers, Deputies Donohoe and Ring. When the two Ministers have approved the report, it will be brought to the Government for consideration and approval. If and when the report has been approved by the Government, I anticipate that it will be published immediately.

The Senator should be aware that the Government is fully supportive of increased competition in the banking sector. It encourages any potential new market entrants to engage further with the Central Bank of Ireland on this matter. The Senator may wish to note that significant Government measures are already in place to support access to finance by Irish SMEs, including the Strategic Banking Corporation of Ireland, the supporting SMEs online tool, the microenterprise loan fund, the local enterprise offices, the Credit Review Office and the credit and counter guarantee schemes. I will give two examples of how Government supports are helping SMEs to access finance and supporting employment.The Strategic Banking Corporation of Ireland began lending in March 2015, providing funds thorough bank and non-bank on-lending partners. To the end of December 2017, some €925 million of SBCI supported lending has been approved for almost 23,000 Irish SMEs, operating across all sectors of the economy, including agriculture, food, retail, health care, transport and manufacturing. The Credit Review Office, CRO, is a Government initiative that helps SMEs who had an application for credit of up to €3 million declined or reduced by the main banks and feel that they have a viable business proposition. This is a strictly confidential process between the business, the Credit Review Office and the bank. The CRO has received almost 900 applications, with almost 700 cases concluded to date. It has successfully overturned more than 50% of the decisions made by banks. Over €48 million has been advanced on foot of the CRO’s recommendations and 3,750 jobs have been created or protected as a result.

In addition to these supports, the Department of Finance is working with other Departments to develop tailored and innovative schemes to meet the evolving needs of Irish SMEs, such as the €150 million agricultural cashflow support loan scheme and the €300 million Brexit loan scheme announced by then Minister for Finance, Deputy Noonan, in budget 2017 and the Minister for Finance, Deputy Donohoe, in budget 2018. Rural and regional development and supporting Irish SMEs to create employment and economic growth are important Government priorities and significant overall policy considerations. The Department of Rural and Community Development will continue to focus on rural Ireland and rural and regional development generally and will provide a co-ordinating role across Government on this priority area. The Senator can be assured that facilitating a functioning and competitive banking and mortgage lending system, in addition to supporting economic growth and employment in rural areas and regional Irish SMEs, remains a crucial priority for the Government.

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