Denis Naughten (Roscommon-South Leitrim, Fine Gael)
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Question 67: To ask the Tánaiste and Minister for Enterprise, Trade and Employment the steps she is taking to support small business in view of the credit crunch; and if she will make a statement on the matter. [7029/09]

John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I refer the Deputy to my replies to Priority Question No 67 and Oral Question No 76 on 10 December 2008, where I set out in detail to the House, the various initiatives and measures in place to address the credit crunch and its impact on SMEs, through Enterprise Ireland, the 35 County and City Enterprise Boards, FAS and my own Department, as a follow-up to the Small Business Forum's Report. These measures and initiatives are ongoing.

Since December, a number of actions have been taken by Government in relation to securing a stable and active banking system to serve the needs of the economy. The Bank Guarantee Scheme, the Nationalisation of Anglo Irish Bank and the Recapitalisation Scheme all address this issue in order to support the broader economy. In particular, the Government's Recapitalisation Scheme for Allied Irish Bank and Bank of Ireland announced on Wednesday 11 February 2009 is a fundamental requirement in restoring stability to our financial sector. Such stability will ensure that the financial institutions can actively contribute to our economic activity and particularly support our enterprise sector.

A key principle of the Recapitalisation Package is the recognition of the importance of business lending particularly in relation to SMEs. SMEs are central to our economy and the provision of bank credit to the sector is a primary target of the overall package. The package contains a range of initiatives that will directly assist our enterprise sector, as follows:

The recapitalised banks have committed to increasing their lending capacity to SMEs by 10% in 2009. The banks have committed to public campaigns to actively promote their lending to SMEs. There is also scope for increased levels of lending to SMEs if mortgage lending is not taken up. This commitment will be monitored by the Financial Regulator.

A Code of Conduct for Business Lending to Small and Medium Enterprises was published by the Financial Regulator on 13 February. This Code will facilitate access to credit for sustainable and productive business propositions and will promote fairness and transparency in the treatment of SMEs by banks. The Code should strengthen the bank-client relationship and develop greater trust and confidence in the banks' lending practices. Banks are now actively promoting new lending as evidenced by recent press and TV advertisements

The Government has decided that there should be an independent review of bank lending to report within five weeks. The recapitalised banks have agreed to fund this independent review which will be managed jointly by the banks, Government and business representatives. The banks have also undertaken to co-operate fully with this review

Building on the banks commitment to the indigenous Venture Capital sector, AIB and Bank of Ireland will both commit a further €15m each to new or existing seed capital funds, in collaboration with Enterprise Ireland's Seed and Venture Capital Programme, to further create and develop indigenous enterprise

The recapitalised banks have confirmed that they have established, or are about to introduce, a €100m Fund each to support environment friendly investment and innovations in clean energy. A quarterly report will be made to the Financial Regulator on the loans made and the purposes for which they have been made.

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 availability of a pool of skilled support for major companies and construction projects is an essential component of Ireland's attraction as a business location. The recapitalised banks have agreed to work closely with the IDA, Enterprise Ireland and with State agencies to ensure the supply of appropriate finance to contractors engaged on major projects sponsored by them.

The banks have 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 projects appears to be blocked and to seek to identify credit supply solutions.

As part of the overall monitoring of the Recapitalisation Package, my Department will remain in regular contact with the Department of Finance and will also ensure that the availability of credit to SMEs is kept under constant review. I will also continue to consult with the representative bodies of small and medium-sized enterprises on all issues impacting on small businesses and I welcome their ongoing valuable inputs to this process.