Kathleen Lynch (Cork North Central, Labour)
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Question 105: 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 this issue, particularly in view of the importance of maintaining employment in this sector; and if she will make a statement on the matter. [19831/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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A properly functioning banking sector is an essential element for the maintenance and development of enterprises, especially SMEs. A key principle of the Government actions to restore stability to the banking sector has been the recognition of the importance of business lending particularly in relation to SMEs. 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' Recapitalisation Package contains a range of initiatives to directly assist our enterprise sector, including the following:

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.

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. This Code which was published by the Financial Regulator came into effect from 13 March 2009. The Code lays down, inter alia, how applications for credit are to be handled, requires that each application is to be considered on its own merits, provides that collateral and personal guarantee requirements should not be unreasonable, sets out what is to happen when banks are declining or withdrawing credit, confirms what information is to be provided to customers and establishes a written complaints procedure for customers to follow when dealing with their bank. The application of the Code will promote fairness and transparency in the treatment of SMEs by the banks and should facilitate access to credit for sustainable and productive business propositions. · 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. Additional banks have now agreed to participate in this Review. The purpose of the review is to ascertain the position on credit availability to SMEs here and to recommend appropriate action to improve credit availability.

Allied Irish Bank, Bank of Ireland and Ulster Bank will also provide funding for SMEs on foot of €300m facilities provided by the European Investment Bank to assist developing SMEs.

I have met with representatives of the recapitalised banks to discuss the provision of bank credit to the sector. In addition, within my own Department, a dedicated group has been established dealing with Access to Bank Credit. This group includes representatives of ISME and SFA, the Irish Banking Federation, the major banks, the main enterprise support agencies and the Department of Finance along with my own departmental officials. I will continue to have these contacts with the business and banking sectors.