Written answers

Tuesday, 16 April 2013

Department of Finance

Credit Availability

Photo of Tom FlemingTom Fleming (Kerry South, Independent)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Finance if he is satisfied that the banks are making adequate credit available to small and medium sized businesses; and if he will make a statement on the matter. [16749/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

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 an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme. The Government has imposed SME lending targets on the two domestic pillar banks 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. The Credit Reviewer, Mr John Trethowan, said in his most recent quarterly report that "both banks have achieved their €3.5bn SME loan sanction targets" and that "over €8bn was sanctioned in 2012; of which approx. €2.5bn (27%) is new lending drawn down". According to the Credit Review Office, the balance of the sanctioned lending represented restructured or refinanced credit to SMEs. The Credit Review Office in the past has noted that this is important in terms of sustaining the businesses and the associated jobs.

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. The banks have submitted their lending plans for 2013 to my Department. My Department, in conjunction with the CRO, has analysed the plans and has met the banks to discuss them. The banks also meet the Department of Finance 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 the Department. My officials and I will engage robustly with the banks to ensure they meet their 2013 targets. It is important to note that the targets for 2013 represent an increase of 33% over the 2011 targets. My Department’s review of 2012 is available at www.finance.gov.ie/viewdoc.asp?DocID=7609&CatID=45&StartDate=01+January+2013. It contains details of some of the actions taken in 2012 including demand surveys, ongoing consultation with the SME sector, initiatives with the banks, the Credit Review Office review and increase of its resources and NPRF funds for the SME sector. Another demand survey is currently being conducted by Red C on behalf of the Department.

Access to Finance for SMEs is a key aspect of the Action Plan for Jobs 2013. It is the Government’s vision that all viable businesses operating in Ireland should have the opportunity to access sufficient finance to meet their enterprise needs in a manner that supports growth and employment in the economy. The SME State Bodies Group was established in 2012 to both develop key policy initiatives to support SME access to credit and other forms of finance, and to ensure their implementation. It will continue in 2013 to engage intensively in proactively addressing issues associated with SME funding and financing in conjunction with the relevant stakeholders through the SME Funding Consultation Committee. My officials also meet frequently with additional stakeholders who wish to contribute to policy development in relation to access to finance.

The Government has taken a number of actions, particularly where SMEs have been refused credit, to improve the situation in relation to credit availability to SMEs. The Temporary Partial Credit Guarantee scheme addresses the situation where the SME is outside the risk appetite of the banks. This can arise because the SME's lack of collateral or the banks' lack of understanding of the business model, the market, the sector or the technology. The three main SME lenders are all participating in the Guarantee scheme. The Microenterprise Loan Fund Scheme will provide loans of up to €25k to start-up, newly established, or growing microenterprises employing less than 10 people, who have commercially viable proposals that do not meet the conventional risk criteria applied by banks. One of the most powerful ways of ensuring the pillar banks provide credit to viable SMEs is through access to the Credit Review process. I would strongly advise anyone who has been refused credit to avail of the services of the Credit Review Office.

Photo of Robert DowdsRobert Dowds (Dublin Mid West, Labour)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Finance his views on banks engaging in constructive refusal of credit for small businesses by means of not replying to requests for credit; his views on whether this is a significant hindrance to job creation; and the measures he is taking to ensure that banks are not engaging in constructive refusal of credit. [16846/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The issue of constructive refusals of credit is dealt with in Statutory Instrument 127 of 2010 which contains guidelines relating to the Credit Review Office. Paragraphs 5 and 6 provide:

5. Where a decision on an application for a credit facility is not given by the participating institution within 15 working days, this shall be regarded as constructive refusal and the borrower may apply for review to the Credit Reviewer.

6. Where a borrower considers that the terms or conditions attached to a credit facility or its price are so onerous as to amount to a constructive refusal, the borrower is entitled to apply for a review. The Credit Reviewer shall issue guidance on the reasonableness of terms, conditions and pricing.

One of the most powerful ways of ensuring the pillar banks provide credit to viable SMEs is through access to the Credit Review process. I would strongly advise anyone who has been refused credit, whether by constructive refusal or otherwise, to avail of the services of the Credit Review Office.

Photo of Robert DowdsRobert Dowds (Dublin Mid West, Labour)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Finance if he will provide, in tabular form, figures from the last year for which they are available for the total number of loan applications made by small and medium enterprises to each Irish financial institution; the number of loan applications from small businesses which were refused by each Irish financial institution; the number of loan applications which were approved by each Irish financial institution, and the number of loan applications which did not get to a stage where they were either approved or refused at each Irish financial institution. [16847/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

My Department only receives the figures requested from the pillar banks. Bank of Ireland has submitted the following information on credit applications: some 55,741 applications were received in 2012, some 47,531 applications were approved in 2012, and some 8,210 applications were declined in 2012. The bank has also informed me that less than 1% of applications were pending decision at year end and these are included in the declined number. Allied Irish Bank has submitted the following information on credit applications: some 34,254 applications were received in 2012, some 31,527 applications were approved in 2012, and some 2,727 applications were declined in 2012. The AIB figures only refer to completed applications and do not include pending applications, the numbers of which would vary from time to time. In addition, the Department of Finance credit demand survey conducted by Red C provides information in the outcome of credit applications by the firms surveyed. The survey covers the period from April to September 2012 and showed that 56% of applications were approved in full, 4% partially approved, 21% were still pending and 19% were refused. When the pending applications are excluded, this gives 76% approved in full or partially and 24% refused. Red C is currently conducting another survey on behalf of my Department which will cover the period from October 2012 to March 2013.

Comments

No comments

Log in or join to post a public comment.