Michael McGrath (Cork South Central, Fianna Fail)
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Question 78: To ask the Minister for Finance if he has raised with the troika the possibility of extending the timeline for the Irish banks complying with the requirement to dispose of assets and deleverage their balance sheets; and if he will make a statement on the matter. [4665/12]

Michael Noonan (Limerick City, Fine Gael)
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As the deputy will be aware the covered banks are required to deleverage circa €70bn of assets by 31 December 2013. To date significant progress has been made in that regard. The two pillar banks met the 2011 deleveraging targets with almost €15 billion of these assets sold at significantly better pricing than anticipated in the PCAR/PLAR 2011 exercise. Total deleveraging achieved across government supported banks was €40.5 billion through end November 2011 against full year 2011 expected deleveraging of €34.7 billion. In addition, Irish banks enjoyed deposit inflows in the final quarter of 2011 despite the very difficult international environment.

It is important to maintain the progress in downsizing our banking system which was made in 2011, and while we have not requested an extension to the deleveraging programme, we are working to refine the deleveraging framework to minimize risks to lending to the economy and discourage excessive competition for deposits. Nonetheless, it is also important, as part of the overall strategy to maintain progress in regard to deleveraging and this momentum will ensure that banks will better able to support the real economy in the shortest possible timeframe.

As things stand the banking system restructuring plan creates capacity for the two Pillar Banks, Bank of Ireland and AIB, to provide lending in excess of €30 billion in the next three years. SME and new mortgage lending for these banks is expected to be in the range of €16-20bn over this period. The Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. The position will be monitored on an on-going basis and discussed with EU Commission, the ECB and the IMF with any refinements or adjustments required considered and addressed.