Written answers

Tuesday, 23 June 2015

Department of Finance

Action Plan for Jobs

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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136. To ask the Minister for Finance considering he is the lead Minister for the Action Plan for Jobs, the steps he will take following the latest National Competitiveness Council report entitled Costs of Doing Business in Ireland 2015 which outlines that new business interest rates for non-financial corporations are up to 81% higher here than elsewhere in the Euro area; and if he will make a statement on the matter. [18356/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Deputy should note that my colleague the Minister for Jobs, Enterprise and Innovation is the lead Minister in relation to the annual Action Plan for Jobs.

I assume the Deputy is referring to the "Credit and Financial Costs" chapter of the National Competitiveness Council report Costs of Doing Business in Ireland 2015, which actually states that "in November 2014, loans of up to €1 million (often used as a proxy for the rate applying to SME loans) are 60% more expensive in Ireland compared to the euro area."

The Deputy will be aware however that I, in my role as Minister for Finance, have no direct function in the relationship between the banks and their customers. I have no statutory function in relation to the banking decisions made by individual lending institutions at any particular time and these are taken by the board and management of the relevant institution. This includes decisions in relation to product interest rates as determined by the banks from time to time. 

I would draw the Deputy's attention to the Central Bank publication "Retail Interest Rate Statistics: April 2015", available at

The publication notes that "new business rates in excess of 6 per cent are observed in sectors such as construction and financial intermediation, while rates as low as 3.18 per cent are applicable to the Electricity & Gas sector. Rates applicable to financial intermediation sector can be diverse owing to the nature of the entities involved. In general, SME lending rates are consistently higher for new business when compared to outstanding amounts. This variance is most notable in the construction and financial intermediation sectors."

However, it should be noted that in the most recent SME credit demand survey covering the six month period to March 2015, only 1% of SMEs that did not demand credit thought that it was too expensive to borrow. The same survey notes that, among those SMEs with outstanding loans, the average cost of credit across all outstanding loans is 3.9%. This is down slightly from 4% in September 2014. 36% of SMEs with outstanding loans report a very low cost of credit between 0-2%, while the majority (61%) have an average cost of credit of between 3-10%.

In addition, the lower cost funding by the Strategic Banking Corporation of Ireland (SBCI) should act as a catalyst for downward pressure on interest rates by fostering greater competition in the marketplace. The establishment of the SBCI is a further important step to help Irish businesses, and the crucial SME sector in particular, to grow and contribute further to our economic recovery.

This creates positive competitive pressure in the banking infrastructure, encouraging new entrants while also pushing existing financial providers to better meet the needs of their clients.

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