Jim O'Keeffe (Cork South West, Fine Gael)
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Question 63: To ask the Minister for Enterprise, Trade and Innovation if his attention has been drawn to the impact on businesses and in particular small businesses of the restrictions of credit by the banks; if he has any assessment of the consequences of this; and if he proposes any measures to deal with it before further jobs are lost. [18786/10]

Billy Kelleher (Cork North Central, Fianna Fail)
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Government policy on banking has been to return the banks to a position where they can access funds and lend these funds on to viable businesses and households to support enterprise growth and economic recovery.

The Government has taken decisive action in order to get credit flowing again. The Bank Guarantee Scheme, the 2009 Recapitalisation Scheme, the nationalisation of Anglo Irish Banks and the establishment of the National Assets Management Agency have all contributed to the stabilisation of the banking sector with a view to facilitating the flow of credit. The 2010 Recapitalisation package builds on the earlier initiatives and includes additional supports for enterprises, including SMEs. In particular, AIB and Bank of Ireland have both committed to making available not less than €3 billion each for new or increased credit facilities to SMEs in both 2010 and 2011. This must include funds for working capital for businesses. Both banks must each produce a plan that includes a sectoral and geographic breakdown of how they intend to divide up this new lending. This will be a significant increase on the figures reported by the banks for 2009 and will help to sustain the economy and foster growth. This figure can be reviewed as the needs of the economy change.

In the past, Irish banking has focused too much on property-related lending and our banks have not been very well acquainted with our modern economic sectors. In order to change this, under the new Recapitalisation arrangements, the banks are required to work closely with Enterprise Ireland to improve their expertise. Specifically they are required to: commit resources to work with Enterprise Ireland and the Irish Banking Federation to develop sectoral expertise in the modern growth sectors of the Irish economy; explore with Enterprise Ireland and the Irish Banking Federation how best to develop the range of banking services that Irish SMEs trading internationally will need; and develop expertise and bring forward new credit products in areas where cashflow, rather than property or assets, is the basis for business lending.

The Credit Review Office headed up by John Trethowan will examine the credit policies and practices of the banks, particularly for SMEs. The Office is also open to review cases where credit has been refused to viable companies and to make appropriate recommendations to the relevant bank concerned. The Government has also introduced a number of initiatives to improve the availability of credit to the small business sector. The Finance Act 2010 provided for the start-up company exemption to be extended into 2010 encouraging both entrepreneurship and economic activity.

The Enterprise Stabilisation Fund was established by Government in 2009, as a 2-year scheme to support viable but vulnerable exporting companies experiencing difficulties because of the economic climate. The fund supplies direct financial support to internationally trading enterprises by supporting their drive to reduce costs and through increased competitiveness, gain sales in overseas markets. In 2009, €58m was spent on 180 projects. To date in 2010, 13 companies have been approved for funding under this initiative.

The Government is also encouraging employers to create new jobs through reducing the costs associated with employment through the Employer Jobs (PRSI) Incentive Scheme. For each new eligible job, the scheme gives an 8%-10% saving on employment costs for the first year of employment. This will actively encourage the creation of new employment now when it is most needed. Work is also under way in my Department on the examination of a possible scheme of Loan Guarantees for the SME sector.

The Government places a high priority on supporting entrepreneurship and growing Irish owned business. The State support agencies, including Enterprise Ireland and the network of 35 City and County Enterprise Boards, are working hard to support and maintain existing business and to help those people who want to start new businesses. Government will continue to monitor the banks' response to providing credit to SMEs to ensure that the significant assistance provided to stabilise the banks results in a proper functioning banking system which supports enterprise development and facilitates Ireland's ability to benefit from a general upturn in international markets.