Billy Timmins (Wicklow, Fine Gael)
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Question 121: To ask the Minister for Jobs, Enterprise and Innovation the position regarding financial assistance (details supplied). [27818/11]

Richard Bruton (Dublin North Central, Fine Gael)
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The initiatives taken by the Minister for Finance to restructure and re-capitalise the banking system is the principal response to making credit available. These initiatives are designed to secure an adequate flow of credit into the economy to support economic recovery, even as the banking system is down-sized.

At the end of March 2011, a range of measures was announced to reorganise, recapitalise and deleverage the domestic financial system in order to restore the banks to health and continue to provide a secure banking system for deposits. The three main elements to this strategy - recapitalisation, strong liquidity standards and a radical reorganisation and downsizing of the banking sector with the establishment of two pillar full-service banks - are fundamental to economic recovery and job creation.

This latest 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. 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. The two banks are also obliged to submit revised lending plans to the Department of Finance to demonstrate how these annual targets will be met.

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.

Businesses having difficulty with credit refusals can use the services of the Credit Review Office which will carry out an independent and impartial review of a bank's decision to refuse or reduce credit. In the context of the CRO's work, there is scope for cases to be considered where the bank's actions are tantamount to a refusal of credit even where a formal refusal has not issued. This is another means of ensuring that the money is lent to the productive sector. With effect from 9 July, the limit for loan applications that can be reviewed by the Credit Review Office has been increased from €250,000 to €500,000. This is a positive development and should encourage more businesses to use the Credit Review Office. In addition to the initiatives of the Minister for Finance and as part of the Jobs Initiative and the commitment given in the Programme for Government, work is underway within the Department of Jobs, Enterprise and Innovation on the design of a Temporary Partial Credit Guarantee Scheme. The Scheme will provide a level of guarantee to banks against losses on qualifying loans to job-creating firms to get banks lending again to industry and entrepreneurs.

Furthermore, in line with the commitment in the Programme for Government, a Microfinance Start-Up Fund to provide loans to small businesses is being developed. Micro-finance is defined as loans of up to €25k, typically over a term of three years, repayable monthly, aimed at start-up early development micro businesses (businesses employing not more than 10 people). The Microfinance fund is not intended to replace any current bank lending nor is it intended to address any broader deficiencies in the banks' provision of lending to the SMEs sector. The Fund, including scheme design and appropriate delivery mechanisms, will be developed with a view to formalising proposals in the context of Budget 2012.

These initiatives are not to replace lending through the normal banking system but to provide additional lending where specific measures are warranted.