Vol. 398 No. 6
1 Mr. Noonan (Limerick East) asked the Minister for Finance if his attention has been drawn to liquidity problems in the banks and building societies; if it is Government policy to restrict credit at present; and if not, the steps he intends to take to eliminate the mis-match between bank resources and demand for credit.
The Central Bank is primarily responsible for the operation of monetary policy including the regulation of credit and interest rates. Its monetary policy statement for 1990 dated 28 February does not impose any credit restrictions. It indicates that overall credit growth of around 10 per cent seems likely this year and that slow growth of resources is an important issue for banks.
However, the latest banking statistics published on 3 May show that during the first quarter of 1990 the balance between bank resources and the demand for credit improved significantly. During the year to 30 March 1990 private sector credit grew by marginally less than in 1989 while non-Government bank deposits grew by 10.6 per cent, over four times the 1989 growth rate of 2.5 per cent. During the same period shares and deposits with building societies grew by 7 per cent compared with 5.9 per cent in 1989. The March banking statistics also show that private sector credit is growing at almost twice the annual rate projected for nominal GNP this year and that during March the banks added further to their excess holdings of secondary liquid assets.
Therefore, the latest banking statistics published by the Central Bank suggest that liquidity improved significantly during the first three months of this year and that the banks and building societies have adequate scope to finance lending to the private sector.
(Limerick East): Has the Minister's attention been drawn to a statement by the Chairman of Allied Irish Banks in which he outlines the difficult liquidity problem facing them at the moment?
I read the statement Deputy Noonan has just mentioned. I cannot figure out the problem. According to the statistics available to me the entire banking system has added significantly to its liquid assets over and above what is required by the secondary liquidity ratio. There may be individual problems in some banks that can be evened out between themselves.
(Limerick East): Is the Minister aware that a bank other than the one I have mentioned have rejected applications for loans even where they have declared the project viable and the repayment capacity of the creditor quite adequate, simply because of a liquidity problem? These people would have to borrow on the Dublin inter-bank market and they did not consider the margin this would allow them to be sufficiently attractive.
I am not aware of that. I would be surprised if there is any shortage of credit because bank credit is growing at almost twice the growth rate projected for nominal GNP this year, that is 14.4 per cent compared with 7.4 per cent. More than adequate liquidity was available in the first quarter of this year and it has improved significantly. It is not marginal. It is, quite significantly, four times the 1989 growth rate, 10.6 per cent this year as against 2.5 per cent last year. The banks themselves are holding liquid assets over and above what is required, so there is no justification for what the Deputy is saying as far as the evidence available to me suggests.
(Limerick East): Is the Minister aware that the percentage of available savings which the banks and building societies are now attracting is less than half what they attracted in the early eighties? Has he any plans to level the playing field to allow all financial sectors to attract a fair amount of available savings?
I do not think the Deputy was listening attentively to what I said in the first part of the answer to the question.
(Limerick East): I was listening all right.
The latest banking statistics published on 3 May from the Central Bank show that during the first quarter of 1990 the balance between bank resources and the demand for credit improved significantly. If it was going the other way I could see the reason for the Deputy's question but it has gone up. It has improved significantly.
(Limerick East): They are in a very bad position, that is the problem.
During the year it improved four times, not marginally. It is 10.6 per cent as against a 1989 growth rate of 2.5 per cent. This is in deposit into the banks. It is going in the opposite direction to what the Deputy suggests.
We must move on bearing in mind the limits on us in the matter of Priority Questions.
