Written answers

Wednesday, 23 May 2012

Department of Finance

Banks Recapitalisation

10:00 pm

Photo of Peadar TóibínPeadar Tóibín (Meath West, Sinn Fein)
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Question 30: To ask the Minister for Finance the amounts being lent by Irish banks to the small and medium enterprise sector; the amount of the €3 billion the banks are obliged to lend following recapitalisation has been lent; and if the Government-placed directors on the boards of the banks have reported any resistance to lending to SMEs. [25638/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, 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 period 2011-2014. SME and new mortgage lending for these banks is expected to be in the range of €16-20bn over this period. This lending capacity is incorporated into the banks' deleveraging plans which allow for repayment of Central Bank funding through asset run-off and disposals over the period to 2013. 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. Both banks achieved their 2011 targets.

I should stress again that the Government has imposed targets for the amounts of credit to be sanctioned by the banks- the targets are not for actual lending as the banks do not have control over when or if sanctioned credit is actually drawn down.

Data provided by the Central Bank indicates that the drawdown of new lending by non-financial SMEs from credit institutions in Ireland was €3.1 billion in 2011. For the Deputy's information, the relevant statistics for credit made available to small business are accessible at: http://www.centralbank.ie/polstats/stats/cmab/Documents/ie_Table_A.14.1_Credit_Advanced_to_Irish_Resident_Small_and_Medium_Sized_Enterprises.xls

In relation to the public interest directors, the position is that any director appointed to the board of the covered institutions, whether under the CIFS scheme or otherwise, is subject to the requirements of company law in the discharge of his or her responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the director's fiduciary responsibilities. Public interest directors do not have a formal reporting relationship to the Minister or to the Department of Finance.

However, in terms of my Department engaging with the banks on the issue of SME credit, the Deputy should note that the pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. My Department, in conjunction with the CRO, subsequently analyses the plan and meets the banks to discuss the content. The banks also meet with my Department and the CRO on a quarterly basis to discuss progress. The banks provide my Department and the CRO with monthly returns outlining their SME lending figures, broken down at a sectoral and regional level. The monthly management meetings with the pillar banks also provide a forum for the issue of SME lending to be raised by my Department.

I should stress however that the Relationship Frameworks with the banks provide that the State will not intervene in the day-to-day operations of the banks or their management decisions including with respect to pricing and lending decisions. These frameworks are published on my Department's website at http://banking.finance.gov.ie/presentations-and-latest-documents/.

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