Pearse Doherty (Donegal South West, Sinn Fein)
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58. To ask the Minister for Finance his views on the assessment in a recent Central Bank of Ireland report that Irish rates for lending to businesses have diverged from the Euro area average over the past year, as rates fell in many countries; that business lending is now 1.24% points above the average; his plans to tackle this divergence; and if he will make a statement on the matter. [35617/15]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy will be aware that in my role as Minister for Finance I 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. 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. 

The recent CBI publication, "Microfinancial Review 2015:1", states that "the mean rate on SME loans during 2014 was 5 per cent in Ireland, compared to 3.5 per cent in the euro area." However, the report goes on to note that "differences in the underlying lending composition, however, may be a factor here. For example, the data include restructured and renegotiated loans, of which there is likely to be an increasing share in Ireland. Cross-country differences are also likely in terms of loan type and borrower type."

It should be noted that in the most recent Department of Finance 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.