Thursday, 28 January 2016
Credit Guarantee (Amendment) Bill 2015: Committee Stage
I move amendment No. 1:
In page 9, between lines 34 and 35, to insert the following:“(5) The Minister will commission a report within 3 months of the act becoming operational outlining how the Credit Guarantee Scheme can help make it easier for businesses that owe money to banks exiting the Irish SME market to refinance those debts with domestic institutions.”.
The original intention of the credit guarantee scheme when introduced in 2012 has not been met. It was very clear early in the life of the scheme that it would not work. Through no fault of the Minister of State's Department, we were left waiting for this legislation. In the meantime, a serious problem arose for businesses that were being forced to refinance their debts because their financial institution was exiting the market.They were left to the mercy of the pillar banks or were being sold off to various vulture funds. While the Minister of State has extended the provisions of the scheme to allow for that, I am anxious that this particular cohort would be the focus of some attention by those institutions promoting the credit guarantee scheme. I would like to get a sense of the scheme helping those businesses and to see they are actually left to the responsibility of one of the pillar banks as opposed to one of these funds entering this space. Commissioning this report and putting this provision into the Bill will allow us to assess that.
I recall Senator White's party colleague, Deputy Dara Calleary, made an identical proposal on Committee and Report Stages in the Dáil. I am not accepting it because this specific area is not appropriate for such legislation. While we foresee a strong role for the Strategic Banking Corporation of Ireland, SBCI, particularly in the operation of counter-guarantees, the Strategic Banking Corporation of Ireland Act 2014 does not empower the corporation to provide for loans direct to small and medium-sized enterprises, SMEs. It does not have the physical capacity or structures to engage in this activity. Any change to this is a matter for the Minister for Finance.
The Department, banks, as well as other finance providers, and the SBCI will actively promote the revised system and ensure businesses are aware of the possibilities available under the new schemes. Tying in what Senator Ó Domhnaill said on Second Stage, the review for the Government touched on the need for better awareness raising and publicity of the benefits of this legislation to be rolled out across the regions to ensure all businesses are aware of the capacity of the new schemes under this legislation. This will be factored into the promotional activities we intend to undertake in this regard. The Department has already spoken to SME representative bodies, including IBEC, the Irish Business and Employers Confederation, ISME, the Irish Small and Medium Enterprises Association, the Small Firms Association and Chambers Ireland, on the need for comprehensive promotion of the revised legislation and ensure their constituent bodies are aware of the schemes. The Department will engage in a comprehensive publicity campaign and will update the public on progress on a quarterly basis through its website. I am sure the figures will be discussed in this and the Lower Houses from time to time.
I move amendment No. 2:
In page 9, between lines 34 and 35, to insert the following:“(5) (a) The Minister shall work with his colleague in the Department of Finance to facilitate a role for state promotional financial institutions such as the Strategic Banking Corporation of Ireland in the scheme in order to enhance the provision of credit to SMEs directly.
(b) The Minister shall be empowered to give counter-guarantees designed to enable state promotional financial institutions access to match guarantee facilities from EU funding sources such as Horizon 2020 funds earmarked for SMEs and the European fund for strategic investment.”.
Picking up on the Minister of State's comments about the strategic banking corporation, the commitment he gave as a member of the Labour Party, as well as that given in the programme for Government - remember that - was that a State bank would be established which would be a separately functioning business bank to lend directly to enterprises. Instead, we got the SBCI which is a far fluffier version of what was proposed. The SBCI needs more teeth. It is beginning to have an impact and I give it credit for that. However, its role as an agent of the existing pillar banks is hampering its standing and its ability to do what we want. We need the commitment in the programme for Government to be honoured in the form of a separate, State-backed enterprise bank out there fighting on the streets and dealing directly with the customers.
This was also raised in the Dáil by Senator White's party colleague, Deputy Dara Calleary. On Committee Stage in the Dáil, I introduced a comprehensive new Part 3 containing provision for the SBCI to work with the Minister through this legislation to continue to enhance the provision of credit to SMEs. It also provides a role for the Minister to be able to give counter-guarantees intended to enable the SBCI to unlock funds from EU sources to share the risks across the banks, the SBCI, the Minister and the potential EU sources. Care was taken not to limit the possibility in the future of other promotional financial institutions also operating in this space without the need for recourse to primary legislation. This allows us flexibility to deal with this fast evolving area.
Funding from EU programmes includes COSME, competitiveness of enterprises and small and medium-sized enterprises, Horizon 2020 funding, as well as the European Fund for Strategic Investment administered by the European Investment Bank and the European Investment Fund, otherwise known as the Juncker plan. These will all be critically important for economic development in Ireland for the foreseeable future.