Written answers

Wednesday, 28 April 2010

Department of Finance

Financial Services Regulation

Photo of Damien EnglishDamien English (Meath West, Fine Gael)
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Question 68: To ask the Minister for Finance his plans to introduce credit directives in respect of financial institutions who have received State capital. [17155/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I assume that the Deputy is referring to the potential to issue directives on credit to the recapitalised institutions. To date, I have introduced one credit directive, S.I. No. 127 of 2010 which sets up the Credit Review System on a statutory basis. The Credit Review Office is available to review banks' decisions to refuse credit to small and medium enterprises (SMEs). It will provide an independent opinion of the banks' decisions on whether the credit should have been granted or not. SMEs can also seek a review of a decision to reduce or withdraw credit. 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 announced earlier this month under the NAMA Act 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 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. These plans will be reviewed and if it is clear that it is necessary, I will introduce an SI to ensure that lending takes place into the economy.

Additionally, I have taken further measures to assist the credit situation in relation to SMEs including the requirement that the two largest banks provide €20 million each for seed capital to Enterprise Ireland supported projects, the requirement that the two banks each set up an additional €100 million fund for Environmental, Clean Energy and Innovation projects, the requirement that the banks commit to working with Enterprise Ireland and the IBF to develop sectoral expertise in the modern growth sectors, the requirement that they explore with Enterprise Ireland and the IBF how best to develop the range of banking services that Irish SMEs trading internationally will need, and the requirement to develop expertise and credit products in areas where cashflow rather than assets is the basis for lending. I have no plans to introduce other credit directives for the recapitalised banks.

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