Written answers

Tuesday, 19 January 2010

9:00 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 302: To ask the Minister for Finance his views on reports in a newspaper (details supplied) that the model of small and medium enterprises loan guarantees being operated successfully in the United Kingdom and other jurisdictions has been ruled out here; his further views on whether a risk sharing element of 25% to 50% on the part of the loan originating institution would ensure an appropriate alignment of interests between lender and guarantor; his views on whether such a scheme would allow for the easing of credit conditions for small and medium enterprises while minimising the impact on the capitalisation and capital requirements of the loan originating institutions; if he has studied the operation of such schemes in other jurisdictions and, if so, the conclusions he has drawn; if such a scheme has been costed here; if such a scheme has been recommended to him by a company (details supplied) contracted by his Department to survey the small and medium enterprise credit environment here and to make recommendations regarding the way this environment could be ameliorated; if he will give further consideration to the implementation of such a scheme; and if he will make a statement on the matter. [2154/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The Government has taken numerous measures to ensure the continued stability of the Irish financial system: the Guarantee scheme, nationalisation of Anglo Irish Bank, recapitalisations and NAMA. These measures have facilitated continued lending to SMEs. Indeed, the recapitalisation of AIB and Bank of Ireland in February 2009 specifically encompassed commitments from the banks to provide additional capacity for SME lending.

The initial Independent Review of Credit Availability conducted by Mazars did not recommend the establishment of a risk sharing structure but rather that such a structure be considered. Risk sharing was assessed and it was clear that there were considerable obstacles to that approach, including the danger that such a scheme would detract from the ordinary process of credit and act as a further subsidy in the banking system. The Deputy will be aware that under the NAMA legislation I am issuing guidelines to all banks participating in NAMA who lend to SMEs, to ensure that SMEs, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the banks. I hope that banks not participating in NAMA or covered by the Government guarantee will also decide to participate. My aim is to have a simple, effective appeals process, run by people with experience and credibility. The banks must comply with the recommendations of the appeal process, or explain satisfactorily why they cannot do so.

In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all. Mr John Trethowan, an experienced banker with a demonstrated commitment to public and social service, is overseeing the establishment of this credit review system with initial administrative support from Enterprise Ireland. Work has commenced on the logistical aspects of the review system and it is envisaged that this will be completed in the near future.

As the Deputy will be aware, there are many supports provided by the State to various parts of the business community. The Government continues at all times to seek to provide appropriate assistance and support to the generation of employment in the State.

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