Michael McGrath (Cork South Central, Fianna Fail)
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64. To ask the Minister for Finance the mechanism used by the Strategic Banking Corporation of Ireland to obtain the services of an intermediary in order to provide finance for businesses; his views on whether the SBCI is distorting the market for finance; his further views on whether there are state aid issues in relation to SBCI's use of intermediaries and specifically the use of one intermediary over another; and if he will make a statement on the matter. [24186/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Strategic Banking Corporation of Ireland (SBCI) is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs that address failures in the Irish SME finance market as well as encouraging competition, innovation and the efficient and effective use of EU resources and financial instruments. The SBCI achieves this purpose through both on-lending and risk-sharing activities.

As the Deputy is aware, the SBCI does not lend directly, rather it acts as a wholesale financial institution providing low cost, long-term wholesale funding to both bank and non-bank finance providers. These partner financial institutions are known as on-lenders. These on-lenders must in turn pass on the benefit of that low cost finance to the final SME borrowers. This is a key requirement in order for the SBCI to comply with state aid rules.

I am informed by the SBCI that the process of engaging in an agreement with a new on-lender generally involves a potential on-lender completing a standard template business plan and due diligence questionnaire. The SBCI then conducts a thorough and detailed assessment of the potential on-lender, including a consideration of its financial strength and repayment capacity; underwriting ability and credit risk management; operational capacity; and management and governance track record. Ultimately, the final decision to enter in to an agreement with a new on-lender is made by the board of directors of the SBCI.

The Agriculture Cashflow Support Loan Scheme and the Brexit Loan Scheme that I announced in Budget 2016 and Budget 2017 respectively clearly demonstrate the SBCI’s risk-sharing guarantee model. The finance providers chosen as financial intermediaries to deploy SBCI’s risk-sharing guarantee schemes are selected via an open call process. In each case, the open call sets out a scoring system against which each applicant is assessed on a number of criteria outlined in the open call document. These eligibility criteria are determined by the requirements of the SBCI’s funding providers, counter-guarantors, Government Departments involved in the scheme and relevant policy considerations.

The SBCI operates on a market neutral basis. The opportunity to obtain SBCI funding as an on-lender or act as a financial intermediary participating in the SBCI’s risk-sharing guarantee schemes is open to any finance provider that can demonstrate that it fulfils the SBCI’s requirements through the rigorous processes that I have outlined.

In this way, the SBCI aims to ensure on-lenders and financial intermediaries maximise the benefit and the service provided to Irish SMEs as well as protecting taxpayer money and the investment of both State and European institutions.