Written answers

Thursday, 20 December 2012

Department of Finance

Credit Availability

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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To ask the Minister for Finance the amount of new lending approved and drawn down, as opposed to renewals or bundling of existing credit facilities by each of AIB and Bank of Ireland in 2012; and if he will make a statement on the matter. [57633/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Bank of Ireland in a press release on 17 December “confirmed that it has achieved and will exceed its €3.5bn SME lending target for 2012. This figure represents the Bank’s approvals for new and increased credit facilities for businesses and farmers. Credit approved for customers seeking restructured facilities are excluded from these figures as reported by Bank of Ireland.”

The bank considers that the actual amounts drawn down by SMEs which have been approved for credit is commercially sensitive information and does not release it.

AIB reports that it has approved credit of €3.75 billion to date and that €660m relates to New Lending.

The lending targets imposed on the two pillar banks are only a part of the Government’s strategy to ensure that viable SMEs are able to access the credit they need. In my recent budget statement, I announced a ten point tax reform plan to help small businesses. I also announced the sanctioning of the appointment of additional reviewers in the Credit Review Office to ensure that SMEs appealing the banks’ decisions to decline credit receive a considered and timely response to their application. We are currently engaged in a public consultation process in order to see what more the Credit Review Office can do to ensure SMEs are getting the support on bank lending they require and I would welcome any proposals from the Deputy on this topic which can be submitted to croassessment@finance.gov.ie. I would strongly urge viable SMEs to appeal any refusals of credit to the Credit Review Office.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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To ask the Minister for Finance the extent to which efforts have been made to monitor the degree to which lending agencies have restricted or refused credit to the self–employed over the past twelve months; if difficulties the self-employed have experienced in meeting their tax liabilities have been directly linked to a gradual diminution or restriction of credit to the sector; and if he will make a statement on the matter. [57653/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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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 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 and are expected to achieve their 2012 targets. The Deputy knows that SMEs include self employed people. In addition to the lending targets imposed on the banks, 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 plans and meets the banks to discuss any issues of note. The banks also meet with my Department and the CRO on a quarterly basis to discuss progress. The monthly management meetings with the pillar banks also provide a forum for the issue of SME lending to be raised by my Department.

In terms of rejection rates from banks, I would remind the Deputy that the CRO can review decisions by the pillar banks to refuse, reduce or withdraw credit facilities, including applications for restructured credit facilities, from €1,000 up to €500,000. The CRO is currently overturning 55% of the refusal decisions referred to them and I would appeal to any self employed business people who have been refused credit by the banks to avail of the services of the CRO.

The banks report by sector and geographical region but do not report on the basis of the structure of the SME, whether it is a sole trader, self employed, limited company etc. The recent Red C survey shows a credit decline rate of 29% for micro enterprises which would include self employed but does note that the numbers of self employed sampled would not be statistically robust. This rate is an improvement on the two previous surveys.

The Deputy should be aware that the Microenterprise Loan Fund Act provides for a scheme which will facilitate up to €40million in additional lending to microenterprises over the next five years. Furthermore, the Temporary Partial Credit Guarantee Scheme can facilitate up to €150m per annum of additional credit. This is designed for SME’s who, because of lack of collateral or because of the specialised sector they operate in, face difficulties in accessing bank credit.

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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