Michael McGrath (Cork South Central, Fianna Fail)
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11. To ask the Minister for Finance the reason no specific lending targets are in place for the pillar banks for 2014; if he is satisfied the banks are meeting the credit needs of personal and business customers; and if he will make a statement on the matter. [8379/14]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, as part of the 2011 recapitalisation exercise, the Government 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 last year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks have achieved their 2011 and 2012 targets. I am informed that both banks sanctioned circa €4 bn in lending in 2013.

Having completed a process of deleveraging, both AIB and Bank of Ireland are now concentrating on growing their balance sheets.   In this context, both banks recognise the need to increase business lending in the period up to 2016, including lending to the SME sector.  Although the targets were a useful policy intervention, the focus now needs to shift towards the collation and examination, on a monthly basis, of more granular data on the funding of the activities of SMEs from both AIB and Bank of Ireland, the wider banking sector and increasingly the non-bank funding sector. This focus is further underpinned by the commitments contained in the "Access to Finance" chapter in the soon to be published Action Plan for Jobs 2014. I will shortly be writing to the banks with a view to ensuring their continued commitment to work closely with my Department in facilitating a positive business environment in which SMEs can prosper and contribute to economic growth, in addition to maintaining and increasing jobs in this vital sector.

In terms of banks meeting the needs of personal customers, the Government continues to work to create an environment conducive to the entry of new entrants, primarily through the implementation of policies to promote economic recovery and employment creation but also through different initiatives to ensure that there is an adequate pool of credit to underpin the recovery. 

In this regard:

we are working to manage and minimise potential market expectations of future State support for the State owned banks which could act as a deterrent to new market entrants;

- we are actively bringing forward new initiatives to promote alternative sources of lending and credit in the Irish marketplace, the most recent example of this being the link with KfW the German State Development Bank;  

- we are working to establish equality in the assessment of credit risk through the establishment of an industry wide credit register to allow for the appropriate measure of risk in lending, allowing incumbent and new lenders to lend with full visibility of the risk of that lending. The Credit Reporting Act was passed at the end of 2013; 

- we are working to reduce switching costs to allow customers to move between banks more easily, enhancing competition and forcing banks to work hard to retain their customers on a commercial basis;

- we are in regular dialogue with potential market entrants as they evaluate potential opportunities in Ireland and will be supportive of new entrants as they emerge.