Written answers

Wednesday, 23 May 2012

10:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 36: To ask the Minister for Finance the extent to which he has engaged with the banking or lending sectors with a view to determination of a strategy to deal with mortgage arrears and the working capital needs of small and medium sized enterprises; if the relevant lending sectors have engaged directly with their customers in this regard; if any indication has been given to him or his Department as to the most appropriate strategy to be followed; and if he will make a statement on the matter. [25652/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Government is intensifying its efforts to address the mortgage arrears problem and a special temporary Government committee, chaired by An Taoiseach, is now meeting on a regular basis to prioritise this work agenda. Government is proceeding on the basis of the recommendations of the "Keane Report" which indicated that a blanket approach to debt forgiveness is not an appropriate or affordable response to the problem of significant mortgage difficulty. The Government's approach on mortgage arrears is to target assistance and relief to those mortgage holders who, through no fault of their own, are experiencing real and genuine difficulty in meeting their mortgage commitments and to assist those mortgage holders, as far as possible and appropriate, to remain in their home if desired. A number of measures are being advanced across a number of Departments to assist mortgage holders experiencing most difficulty including personal insolvency reform, the "mortgage to rent" initiative, direct engagement with mortgage lenders by the Central Bank as part of the Mortgage Arrears Resolution Strategy (MARS) process.

Personal insolvency reform is a central plank of the Government's overall agenda to tackle the mortgage arrears problem - while this work will take a little while longer that originally envisaged, due to the complex legal and drafting issues, it remains a legislative priority for Government and the intention is to publish the Bill before the end of June. The Minister for Justice, Equality and Defence also indicated that the strong intention is to commence second stage of the Bill before the Oireachtas summer recess.

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 SME lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending, including lending for working capital purposes, 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. 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. The banks also meet with the 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/ .

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.

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