Patrick O'Donovan (Limerick, Fine Gael)
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Question 173: To ask the Minister for Finance if he has examined the impact of the deterioration of the property market here on other core business activities of those persons who were engaged in property speculation; if he has encountered situations in which banks, covered by the banking guarantee, have wound up profitable, viable and functioning core businesses to service property debts; and if he will make a statement on the matter. [27402/11]

Michael Noonan (Limerick City, Fine Gael)
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As I mentioned in my appearance before the Joint Committee on Finance, Public Expenditure and Reform on 1 September last, I am aware that contagion of the property collapse spread beyond the property and construction industries and into small businesses that took the decision to invest their profits in property. Notwithstanding the fact that some SMEs may have engaged in property speculation and subsequently suffered from the collapse in property prices, the restructuring of the domestic banking sector creates capacity for the pillar banks to lend in excess of €30 billion over the next three years in SME and other important sectors. This is in excess of Central Bank estimates of the likely demand for SME and mortgage credit over this period. Both pillar banks are concentrating on the Irish economy and need to issue credit to make profits and rebuild their balance sheets.

As the Deputy may be aware, the Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks will be required to sanction lending of at least €3 billion this year, €3.5 billion next year and €4 billion in 2013 for new or increased credit facilities to SMEs.

Both pillar banks have provided me with their plans to ensure that the 2011 target is achieved. This is particularly relevant given the comments contained in the fifth quarterly report of the Credit Review Office, which stated that "it will be a challenge for each of the banks to reach their €3bn sanction target for new and restructured facilities in the current year."

The Deputy will also be aware that the Credit Review Office (CRO) assists SME and farm borrowers who have had an application for credit to the pillar banks declined or reduced, and who feel that they have a viable business proposition. The CRO also look at cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment. In increasing the ceiling on eligible loan applications from €250k to €500k recently I have significantly expanded the number of companies that can turn to the CRO to appeal the decision of their lending institution.

It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.