Willie Penrose (Longford-Westmeath, Labour)
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Question 48: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to the continuing difficulties being faced by small and medium sized companies which are being refused credit by banks; if she has had discussions with the banks on the issue, particularly in view of the importance of maintaining employment in this sector; and if she will make a statement on the matter. [13339/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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I have met with both ISME and the SFA to discuss issues impacting on the SME sector, including access to bank credit. I have also met with representatives of the recapitalised banks to discuss the provision of bank credit to the sector. In addition, within my own Department, I have established a Roundtable on Access to Bank Credit which includes representatives of ISME and SFA, the Irish Banking Federation, the major banks, the main enterprise support agencies and the Department of Finance and my own Department.

The Government's Recapitalisation Scheme for Allied Irish Bank and Bank of Ireland 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, thereby maintaining employment particularly employment in the SME sector. The Banks Guarantee Scheme and the nationalisation of Anglo Irish Bank also sought to restore and maintain such stability.

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. The recapitalised banks have committed to increasing their lending capacity to SMEs by 10% over 2008. This should ensure that sound businesses will receive support from their banks. There is also scope for increased levels of lending to SMEs if mortgage lending is not fully taken up. The banks have undertaken public campaigns to actively promote their lending to SMEs. Recent Press and TV advertisements together with information sessions with businesses are evidence of the banks' commitments in this regard.

A €100m environmental and clean energy innovation fund is also being established by each bank as well as a further €15m each to new or existing seed capital funds. Much of this funding will flow to small and medium enterprises. SMEs are also covered by the Code of Conduct on Business Lending to SMEs which was also part of the Recapitalisation Scheme. This Code was published by the Financial Regulator on Friday 13 February 2009 and came into effect from 13 March 2009. The Code extends beyond the recapitalised banks and embraces the key credit providers (excluding credit unions). The Code has the effect of law under the Central Bank Act, 1989. The objectives of the Code are:

to facilitate access to credit for sustainable and productive business propositions,

to promote fairness and transparency in the treatment of SMEs by banks, and

to ensure that when dealing with arrears cases the aim of a bank will be to assist borrowers to meet their obligations, or otherwise deal with the situation in an orderly and appropriate manner.

The Code should strengthen the bank-client relationship and develop greater trust and confidence in the banks' lending practices. Lenders covered by the Code are required to offer their customers an option for an annual review meeting, to include all credit facilities and security, including collateral. Banks are also required to treat all credit applications on their merits, 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 seek to agree an approach to resolve problems and provide reasonable time and appropriate advice.

The recapitalised banks have also agreed to pay for and co-operate with the carrying out of an Independent Review of Bank Lending to SMEs, to be completed by the end of April. The purpose of the review is to ascertain the position on credit availability to SMEs in Ireland and to recommend appropriate action to improve credit availability, taking account of the terms of the Credit Institutions (Financial Support) Scheme 2008. Allied Irish Bank, Bank of Ireland and Ulster Bank will also provide funding for SMEs on foot of a €300m facility provided by the European Investment Bank and announced last week. This funding should be available over the coming weeks.

Funding to the SME sector is also provided through my Department and the State Enterprise Support Agencies. The Department's continuous support for indigenous companies arises through maintaining a positive business environment and through particular interventions from State Agencies such as Enterprise Ireland, FÁS and the County and City Enterprise Boards. The allocations in my Department's Estimates for 2009 will ensure that we continue to build on this strategy for the future. As I have already said, SMEs are central to our economic development and the range of measures and supports in place will continue to help the sector adapt to the current economic climate. The services provided by the development agencies are kept under review and will be adjusted to respond to the current economic situation.