andMr. Bruton asked the Minister for Finance if he will outline the terms on which the special foreign loans being dispensed through the ACC and the associated banks have been borrowed; the rate of interest and other conditions which farmers have to meet who borrow from the loans; the rate of commission being obtained by the credit institutions dispensing the loans; the method whereby the rate of commission was determined; if money is being set aside to provide an insurance fund for the Government against the eventuality of the exchange risk guarantee being called upon; if so, how the amount of money being set aside was determined; the use to be made of such money in the meantime and in the event that it is not called upon to cover the exchange risk; how much of the loan funds obtained have so far been taken up by farmers; and the use being made of the money which has not yet been allocated to farmers.
Ceisteanna—Questions. Oral Answers. - Farmers' Foreign Loans.
The institutions concerned borrow at variable interest rates which are refixed periodically.
The rate of interest to the borrower is also variable and is refixed periodically; currently it is 12½ per cent to 13¾ per cent. A farmer must be working to a farm plan, or have one drawn up in consultation with his agricultural adviser or consultant, to be eligible to apply and his loan application must be for a purpose for which the scheme was established.
The operating margin of the ACC and the Associated banks in respect of the schemes is 2½ per cent and 2 per cent respectively. These margins were determined by reference to the special circumstances of the schemes and are intended to cover operating expenses, provision for bad debts and so on. They are lower than the institutions' usual lending margins.
The interest rate charged to the borrower includes a contribution towards possible exchanges losses and by residual loss will be borne by the Exchequer.
The amount of the contribution has been determined by reference to the currencies being borrowed, subject to providing farmers with loans at favourable interest rates. These contributions are credited in special interest bearing accounts with the institutions concerned and may be used in the meantime for their general purposes. Any balance remaining in the special accounts on termination of the schemes will be paid to the Exchequer in consideration of its having borne the residual exchange risk.
In the case of the ACC, funds onlent as at 28 November 1980 amounted to £19.7 million and a further £5.5 million has been committed. Funds not yet allocated to borrowers are invested by the ACC in financial assets. The associated banks commenced operating the scheme towards the end of October and the total amount onlent by them to date is £9.5 million. As they are borrowing only to meet demand under the scheme they do not hold balances awaiting allocation.