Sandra McLellan (Cork East, Sinn Fein)
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To ask the Minister for Finance if he will explain the decision of the National Assets Management Agency to provide €1bn in credit to a bust bank, the Irish Bank Resolution Corporation, at an interest rate of 1.52% per annum; the reason there is not such a scheme for small and medium enterprise; and the State aid implications of this order. [14081/13]

Michael Noonan (Limerick City, Fine Gael)
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As the deputy is aware, on the 7th February 2013 I issued a Direction (NAMA/3/12/IBRC Act) to NAMA pursuant to the IBRC Act 2013 to provide such credit facilities to a special liquidator on such terms and conditions, as are specified in the direction. This was done in order to protect and preserve the value of the IBRC assets during the liquidation process and ultimately to protect the interests of the taxpayer. NAMA has complied with this Direction and made a €1 billion credit facility available to the special liquidator. The interest rate as per the facility agreement is referenced to the daily one-month euribor rate plus a margin of 140 basis points. The facility will be advanced to IBRC (in Liquidation) as needed for both the general corporate purposes of the Company and to discharge the Company’s obligations to derivatives counterparties under derivative collateral arrangements and/or obligations to the NTMA under the NTMA ISDA Master agreement. The amounts drawn under this facility shall constitute and rank as costs of the liquidation of the Company.

The Government recognises that SMEs are the lifeblood of the economy and will play a vital role in the recovery of employment growth in our country. One of the key priorities of the Programme for Government is to ensure that an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme. The Economic Management Council meets the banks on a regular basis and discusses the key issues pertaining to this priority. My officials also meet regularly with key stakeholders at the forum of the SME Funding Consultation Committee.

The Government has imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks have reported that they achieved their 2011 and 2012 targets.

In addition to these lending targets, the banks are required to submit their lending plans to the Department and the Credit Review Office at the beginning of each year, outlining how they intend to achieve their lending targets. The banks also meet with the Department of Finance and the Credit Review Office on a quarterly basis to discuss progress. The monthly management meetings with the banks also provide a forum for the issue of SME lending to be raised by the Department.

The Credit Review Office can review decisions by the banks to refuse, reduce or withdraw credit facilities, including applications for restructured credit facilities, from €1,000 up to €500,000. The Credit Review Office is currently overturning 55% of the refusal decisions referred to them and anyone who has been refused credit by the banks should avail of the services of the Credit Review Office. I have received a small number of representations from individual SMEs regarding the availability of credit. I have referred some of these SMEs to the Credit Review Office which has been able to provide assistance.

I recently sanctioned the appointment of six 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.

The credit stream available to SMEs now also includes the Microenterprise Loan scheme which will facilitate up to €40 million in additional lending to microenterprises over the next five years. In addition, the Temporary Partial Credit Guarantee Scheme can facilitate up to €150 million per annum of additional credit. The Scheme 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.