Martin Ferris (Kerry North, Sinn Fein)
Link to this: Individually | In context

Question 48: To ask the Minister for Finance his views on the Mazars review of lending to small and medium enterprise in the final quarter of 2009 which showed that SME lending was down by 3.6% in the year; when Bank of Ireland is required to submit its SME lending plan to his Department, as required under the terms of recapitalisation of the institution; if this lending plan will be presented to the Houses of the Oireachtas; when AIB and Bank of Ireland plan to start making the €3 billion in credit facilities, as required under the recapitalisation plan, available to SME's; and if he will make a statement on the matter. [17098/10]

Seán Sherlock (Cork East, Labour)
Link to this: Individually | In context

Question 75: To ask the Minister for Finance if he will comment on the most recent Mazars review of lending to small medium enterprise; and if he will make a statement on the matter. [17219/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 48 and 75 together.

I consider it important to look at the overall picture in relation to SME credit including positive aspects and not to focus solely on negative aspects of the report. The third Mazars report on lending to SMEs, which covers the period from October to December 2009, showed that credit applications in number and value terms rose slightly in the last quarter of 2009 over the previous quarter, which is encouraging. The level of applications for credit would appear to be stabilising and Mazars also reported a small improvement in the overall credit approval rate. However, the reduction in the stock of credit, as repayments exceed new credit, and in credit quality reported by the banks remains a concern for the Government. To address this concern, I announced earlier this month that AIB and Bank of Ireland are to make available a minimum of €3 billion each for new or increased credit facilities, including working capital targeted at SMEs, in the real economy in each of the next two years.

A letter was sent to both Bank of Ireland and AIB on 7 April requiring them to prepare a SME lending plan, broken down by sector and geography for submission to my Department by 12 May. Both banks are expected to make the credit available immediately and should not wait until the plans are submitted. The recently established Credit Review Office is available to review banks' decisions to refuse credit to businesses. It will provide an independent opinion of the banks' decisions on whether the credit should have been granted or not. It is possible that the existence of the Office could have an effect on the banks' behaviour in relation to credit. Businesses can also seek a review of a decision to reduce or withdraw credit. This should resolve the contentious issue of whether the banks are willing to lend to viable businesses.

I have taken a number of other actions to assist the credit situation in relation to SMEs. The two largest banks are required to provide €20 million each for seed capital to Enterprise Ireland supported projects. They must each set up a €100 million fund for Environmental, Clean Energy and Innovation projects. In addition the banks are required to commit to working with Enterprise Ireland and the IBF to develop sectoral expertise in the modern growth sectors, to explore with Enterprise Ireland and the IBF how best to develop the range of banking services that Irish SMEs trading internationally will need. They are also required to develop expertise and credit products in areas where cashflow rather than assets is the basis for lending.