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Dáil Éireann debate -
Wednesday, 13 Nov 2013

Vol. 820 No. 4

Access to Credit: Motion (Resumed) [Private Members]

The following motion was moved by Deputy Dara Calleary on Tuesday, 12 November 2013:
That Dáil Éireann:
notes that:
— accessing credit remains very difficult for businesses and personal customers throughout the country;
— the continuing decline in the number of banks operating in the Irish economy, particularly in retail banking, will increase costs and reduce choice for businesses and consumers;
— there is a significant rise in the number of people accessing credit by means of expensive moneylenders;
— non-bank funding in Ireland is low by international standards; and
— there is a commitment in the programme for Government to establish a strategic investment bank;
— the importance of credit for the small and medium enterprise, SME, sector in sustaining an economic recovery and supporting job creation;
— that competition and strengthened regulation are essential to a properly functioning banking sector; and
— that increased bank fees and charges are placing a significant burden on business and personal customers; and
calls for:
— the Central Bank to examine the competitive state of the Irish banking sector;
— action to encourage non-domestic banks to establish a retail presence in Ireland;
— verification that the State-supported banks are fully meeting lending targets;
— action to improve non-banking sources of funding for the SME sector;
— improved regulation of licensed moneylenders to protect consumer interests, and measures to tackle illegal moneylenders;
— a State-owned enterprise bank to be established as a permanent solution to the lending gap which exists in Irish banking; and
— action to be taken to ensure the long-term stability of the banking sector, taking into consideration the imminent report of the Committee of Public Accounts on bank stabilisation.
Debate resumed on amendment No. 2:
To delete all words after "That" and substitute the following:
“notes that, in order to ensure an adequate flow of credit to viable companies, this Government in 2011 imposed challenging targets on AIB and Bank of Ireland for lending to small and medium businesses, and continues to monitor the banks’ progress in meeting these targets;
acknowledges that the Credit Review Office is available to businesses refused credit by Bank of Ireland and AIB and has overturned over half of the cases referred to it and encourages businesses to use this important facility;
notes that:
— both AIB and Bank of Ireland have stated that they have set aside €2 billion each for new mortgage lending in 2013, while Permanent TSB has indicated that it is prepared to lend over €300 million in this area; and
— this Government inherited an economy with a severely impaired banking system but has moved to ensure, through the implementation of effective policies to promote economic growth, that Ireland remains an attractive location in which foreign banks can operate;
acknowledges that, while the number of consumers choosing to make use of the services offered by licensed moneylenders has increased by 20% since 2005, the majority of moneylenders’ customers reported high satisfaction levels regarding service and believe that they are treated fairly when in arrears;
notes that:
— moneylenders are licensed and regulated by the recently-strengthened Central Bank and that consumers continue to be protected by the Central Bank’s Consumer Protection Code for Licensed Moneylenders; and
— Ireland is leading the dialogue across Europe on how best to expand market-based non-bank financing and that the recent budget included initiatives to encourage equity investment in Irish businesses;
further acknowledges that:
— the programme for Government contains a clear commitment to creating a strategic investment bank that will become a provider of finance to large capital projects, a conduit for venture capital, and a lender to small and medium enterprises, SMEs; and
— while the Government’s priority at present is the creation of the Irish strategic investment fund and the reorganisation of the National Pensions Reserve Fund, which can make investments more quickly than would be possible were the Government to establish a bank for this purpose, it is intended, in parallel, that the strategic investment bank concept will be further considered;
recognises that the National Pensions Reserve Fund has established funds that support both strategic projects and a number that support SME financing;
accepts that SMEs are the engines of economic growth providing over two thirds of employment in the State and that the Government has charged the SME State bodies group with the task of implementing initiatives aimed at meeting the needs of Irish businesses for access to a wide range of bank and non-bank finance as set out in the Action Plan for Jobs;
further recognises that Ireland, in the course of its recent Presidency of the European Union, played a key role leading the debate at EU level to ensure that banks in Europe will be well regulated, well capitalised and sufficiently robust to withstand economic cycles;
notes that a number of significant legislative reforms have been undertaken since the financial crisis aimed at building a strengthened regulatory framework for the Irish financial services sector and responding to the pre-existing shortcomings that had been identified in our system of financial regulation;
further notes that these legislative reforms have been supplemented by a significant increase in regulatory activity by the Central Bank with a corresponding increase in staff numbers and powers; and
notes that section 149 of the Consumer Credit Act 1995, as amended, provides that credit institutions and bureaux de change must notify the Central Bank if they wish to introduce any new customer "charge" for providing a service or increase any existing customer "charge" for providing a service.”

- (Minister for Finance, Deputy Michael Noonan).

Deputies Ross and Wallace are sharing time and have five minutes each.

This motion is particularly appropriate, because it is proposed at a time when the banking landscape is moving very quickly. Two recent events highlight the need to look at the Government's lack of vision for the banking sector, and the lack of success it has in moving nimbly within that context. The most significant events which have happened in banking recently have occurred in the last few weeks, namely, the departure of some foreign banks. I refer to ACC and Danske Bank. That is a disaster for the banking system in Ireland. The Government's amendment displays its lack of vision for the banking sector. The amendment states, somewhat farcically, that "Ireland remains an attractive location in which foreign banks can operate". Foreign banks have voted with their feet. Bank of Scotland (Ireland) is gone. Danske Bank is gone to all intents and purposes. ACC is also gone. To say that Ireland is an attractive location for foreign banks when they are all leaving is absurd.

The skimpy presence of others is also alarming. Ulster Bank, which is owned by its parent, RBS, declared dismal figures two weeks ago and unconvincingly asserted its intention of staying in Ireland subject to a review, which is also ominous. The Government's response to this departure is not to encourage foreign banks to come here, but to bolster the failed policy of the pillar banks. When we heard that the Government was introducing this policy of two pillar banks over a year ago, many of us said this would lead to less competition and to a bigger cartel. What is happening now is that the two big banks are already shaping up for a new cartel. They cannot believe their luck. Government policy has led to a lack of a friendly climate for foreign banks and has sent the foreign banks home, and is leaving it all back to Bank of Ireland and AIB. What happens next is quite simple. The consumers are going to suffer as the cartel is back. They will crucify their customers and bolster their reserves. The policy of pillar banks must be reviewed because that simply is leading to a cartel.

The one strength of the pillar banks is that they are too big to fail. We are back to that scenario. The Government cannot let them, under any circumstances, collapse or deteriorate in any way. Therefore, they have the sort of power that banks had in the past when a duopoly or a monopoly existed. It is unhealthy when the banks cannot be allowed to fail and they know this. The people who suffer will be the consumers and citizens.

The other event which has recently happened is also alarming, and I would like to hear the Minister's comments on it. Two events ask questions of the regulator and about what is going on. First, a big hole in Royal and Sun Alliance was announced last Friday. The facts of that are not known, but it is known that RSA is regulated by the Central Bank. We must know why the Central Bank did not spot that earlier. We must know if the Central Bank was doing its duty. We must know if it was setting the sort of claims ratios which are necessary and if it was monitoring that institution properly. The second event which alarms people about the regulator is the story of Newbridge Credit Union. That credit union is also regulated by the Central Bank and we must ask questions about what the Central Bank was doing in allowing a credit union to make loans which would make bankers blush. How has that been happening on the watch of what the Government claims to be a new and strengthened regulator?

The majority of people in this country work in the domestic economy, but sadly, the domestic economy has not been the priority of this Government. Its members have spoken about growth, GDP and the economy coming around, but it must be hard to tell that to people whose living standards are continuing to fall. It is not right to say that austerity has worked when the majority of people have suffered more and more with every passing year.

The lack of access to lending has been dramatic for most businesses in the domestic economy. It has been an absolute killer. The Government owns a large portion of the pillar banks - nearly all of AIB and 15% of Bank of Ireland - but it cannot instruct them what to do. They would be out of business if the Government had not rescued them. It was an inevitable collapse, but the Government saved them yet still cannot tell them what to do. It is hard to credit the idea that anybody could buy out a company and not be able to dictate what the company does.

That is a new one in the world of business.

We have been told for a long time that these banks were of strategic importance, but they were closed for four years. I challenged a banker in AIB about 18 months ago about this. I asked him to tell me the truth on whether the banks were open or closed. He said that if I wanted the "Goddamn truth", then yes, the bank was closed. He said that they would not dare risk giving money to anybody in this country at the moment, unless they were gold-plated. The truth is that they have failed to deliver and have not been of service to the people.

In its programme for Government, the governing parties stated that they would bring in a strategic investment bank. This evening I got my parliamentary assistant to check how many times I raised the issue of a strategic investment bank in this House, and I found out that I have asked 11 times whether the Government would deliver on this promise. Every time I asked, I was told that the Government would do so, but it is now two and a half years later. I am not a fan of Francois Hollande, but when he stood for election, he told the French people that he would introduce a strategic investment bank if he was elected. He was in power five months when he set up a strategic investment bank with a lending facility of €42 billion. This Government is in power for two and a half years, but we have no strategic investment bank. Such a bank would mean so much to Irish business.

The Government set targets for the banks for lending to small and medium businesses. A friend of mine had an overdraft of €50,000 with one of the pillar banks. A few weeks ago he got a letter in the post from his bank manager telling him the overdraft was cancelled, and that he would have to arrange a meeting about it. He spoke to the bank manager within a week. The overdraft was reinstated and this qualified as new lending for the bank. That €50,000 overdraft was cancelled and then reinstated, and it qualifies as new lending. This allows the banks to claim they are lending. Most of the SME owners that I know get loans simply to pay off debt. So little money has gone into investment in the domestic economy in the last four or five years. It is frightening.

We often talk of a lost generation due to emigration of young people, and this is true. However, there is also a lost period for the domestic economy over the last five years that will have repercussions for a long time.

It is lost and it is not coming back. The domestic economy will recover to a degree in time. Of course it will, as night follows day. It has to recover some time but we have lost five good years. The Government could have had a strategic investment bank in place and could have done a lot to help those people, but it did not.

I call Deputy Paul Connaughton, who is sharing time with Deputies Joe McHugh, Dan Neville, Peter Fitzpatrick and Anthony Lawlor.

I thank the Leas-Cheann Comhairle for the opportunity to speak on this motion. I support the Government's counter-motion as I believe that the work done to date to address the weaknesses exposed by the banking collapse needs to continue and be built upon.

I acknowledge that people are concerned at the number of recent withdrawals from the Irish market and are worried about the implications this will have for competition in the banking sector in the future. This must be a cornerstone of Government banking policy. Bank of Scotland (Ireland) announced its decision to exit the Irish market some months ago, but the recent decision by ACC Bank, followed closely by the decision of Danske Bank, has caused alarm in the minds of many members of the public.

With a financial crash of the magnitude of that experienced in Ireland, financial retrenchment was somewhat inevitable. Restructuring, cost-saving and the re-design of products are issues that all banks operating in Ireland have had to face in recent years. As the banking landscape continues to be moulded, products and services will change and price transparency will be key to ensuring customers get good value for money from their banks. Bank charges are a cause of concern for many people, and with a shrinking number of players in the banking market, much needs to be done to educate consumers to ensure they are fully aware of what their banking service is costing them and how those charges can be reduced.

Much work has been done in recent years to allow customers to switch their accounts between banks, and this will have to be enhanced in coming months. Customers also need to be made aware that in the current business and banking climate, there is little to show for being a loyal customer. Those who shop around in banking terms are rewarded for their efforts, and more must be done to make consumers aware of this. This Government is encouraging new entrants to the Irish banking market and many of the problems experienced by banks that have exited the market related to reckless lending during the property boom. New entrants can look forward to a much more stable and profitable banking landscape in Ireland, should they decide to enter the market.

The announcement in June of this year that the Government is to establish a strategic investment fund, which will absorb the National Pensions Reserve Fund and make the €6.4 billion resources in that fund available for commercial investment to support economic activity and employment in Ireland, is very welcome. Several constituents have suggested to me that the existing structure of ACC Bank should be used for that purpose, a suggestion with real merit as the ACC was established with the aim of providing investment to the agricultural sector and small business to support economic activity and employment, so this would be a natural fit for 21st century conditions.

There were few winners in the crippling recession that Ireland has endured, but one group that benefited significantly from the economic misery caused by job losses, income drops and shorter working hours was Ireland's moneylenders. In the past eight years the number of people using moneylenders has increased by 20%. I know there is a licensing system in place for moneylenders and this was recently strengthened by the Central Bank, but more work remains to be done to protect people who use moneylenders. Many European countries have much lower ceilings on the levels of interest that can be charged by moneylenders and we should consider reducing the highest interest rates, while at all times being mindful of the dangers of pushing Ireland's poorest families away from licensed moneylenders into the even more dangerous embrace of unlicensed moneylenders. To combat the lure of the moneylender, we need a working credit union system and I know the Minister is making every effort to ensure a vibrant credit union is kept in place, one which individuals and families feel they can approach in times of need.

Another issue that must be addressed is the future of banking for people who live in rural areas. The population levels in Dublin and the surrounding commuter counties justify the provision of a significant level of broadband, but many swathes of Connacht are without proper broadband access and thus online banking is not a viable option. Added to this is the closure of many bank branches and a message from banks that they do not want to see customers in branches and instead want them to do their banking online. The reality, however, is that this is not an option for a great many people in this country, not simply an older cohort who are unfamiliar with online banking or those who are reluctant to have all their bank details online - a reluctance that is even more understandable and justifiable given the events of this week and the data protection issues experienced - but also the many thousands who live in areas without access to high speed broadband.

This has serious implications, not just for individuals, but also for many small businesses who are forced to hold cash on the premises because of the closure of local bank branches. This Government has introduced significant legislative changes to build a strong banking sector in light of the serious deficiencies exposed in the financial sector. We are working to ensure householders and businesses, small and large, have access to the credit they need to manage and grow their activities, while at the same time ensuring the proper oversight systems are in place to ensure the collapse of recent years is never repeated. This is why I support the Government's counter-motion on this issue.

As the Leas-Cheann Comhairle is aware from the work he does with me as a member of the Oireachtas Joint Committee on the Implementation of the Good Friday Agreement, when we go to communities in Northern Ireland and speak to people from Northern Ireland, there is a recurring theme - the past. It keeps coming back to bite us and people want to know how the past affects their everyday lives. People in Northern Ireland have a burning desire to deal with that past in order to move forward. The big question on everybody's lips is how that will be addressed. The US envoy, Dr. Richard Haass, is moving between London, Dublin and Belfast, working on a formula to address the terrible atrocities and damage done to the communities in Northern Ireland and the devastation whose legacy weighs on many individuals there.

The Leas-Cheann Comhairle may wonder why I refer to this when talking about this Private Members' motion on banking and credit flow to small and medium enterprises. I mention it because I want to know whether we can seriously and legitimately, as a group which represents the people, talk about banking without talking about the past. Can we move forward from the damage and the devastation caused to individuals, parishes, communities, families and society by poor judgment, lack of transparency and regulation and disregard for the way in which we should lead our lives? The perpetrators of this long-term damage have contributed to a lost generation and decade. We will lose a decade as a result of the decisions and irresponsible behaviour of people who were in charge of banking, be it in the banking sector or government.

To move forward we need a formula and we do not have one. We are grappling with ideas and asking how we deal with the banking past because we have to learn from the mistakes of the past and we cannot repeat them. One thinks of sayings such as "past performance is obviously a good indicator of future performance", and "it will happen again" and "there are bubbles and bursts", but we owe it to the lost generation to deal with the devastation this has caused for many individuals, such as those in the Mayo constituency of the Minister of State for Transport, Tourism and Sport, Deputy Ring, who have to fly from Knock to London every Monday morning, leaving their families for five days, and fly home on Friday to see them. Young people in my county are going to Boston and Australia to find work because there is none here because of the devastation caused by the past. People do not forget what has happened to them and will not forget it. They need justice for themselves and to see justice done to people in positions of responsibility. Who takes responsibility?

There is an underlying or perhaps an overarching theme relating to the way our democratic system works in this country. If individuals in a position of responsibility do something wrong, what are the consequences and repercussions for them? Irish people do not ask for much. They simply want justice, fairness and answers. Each Member of the House has a responsibility in this regard. I do not say this in a party political way because we were not in government when this happened. Our responsibility is to come up with a formula to deal with the legacy issues of banking, the consequent devastation and the resulting damage.

Let us consider the plight of a couple now living in a two-bedroom apartment somewhere in this city, who took out a mortgage for €600,000 and have three children ranging between four to eight years of age. They are living in a two-bedroom apartment because they cannot get out of negative equity or move on to buy a new house. We owe it to the lost generation and we also owe it to the people who have been placed in an unenviable position whereby their lives have been devastated and their opportunity has been taken away. That is our job as legislators. Some of us in the body politic may believe we are constantly being castigated and people in the House can give out about various shows on the radio. However, there is an anger among people and our job is to deal with that anger. We must come up with a formula because the people are owed that if nothing else.

I welcome the opportunity to discuss this important issue relating to the future of our country, our people and employment. While we are creating jobs by attracting investment from overseas there is a gap in respect of the creation of jobs in small and medium sized businesses and indigenous businesses. Credit for such firms is vital to maintain and develop business and to create employment opportunities. It is important that all feasible businesses in the country should have the opportunity to access sufficient funds to meet their enterprise needs because that approach supports growth, employment and economic development. One of the key issues is economic growth and the small and medium-sized enterprise sector has a key role to play in creating the economic growth which is necessary for the future.

The role of the banks is vital; they have a key role to play in making credit available to support economic recovery. Let us consider the role of the Credit Review Office, which was established to help SMEs or farm borrowers who have had an application for credit declined or reduced and who believe they have a feasible business proposition. The promotion of the office is not strong enough. Everything possible should be done to promote the office now that the upper limit has been increased from €500,000 to €3 million. That is a significant development in respect of the role of the office in the credit situation.

It is interesting that 55% of those who requested a review have had their applications overturned. This should be seriously examined. Why are such a high number being overturned? What are the different criteria applied by the banks and the Credit Review Office? Is better communication possible between the banking sector and the Credit Review Office to inform, advise and perhaps put pressure on the banks to apply similar criteria so that people can secure credit? It is important that the workings of the Credit Review Office are recognised. We would all like complete success but the office must build on the success it has had and encourage people who have been refused to obtain advice and discuss the matter to establish whether the case can be re-examined.

The motion calls for the introduction of a strategic investment bank. The Government has committed itself in the amendment to creating a strategic investment bank to provide finance to large capital projects. It will also fund small and medium enterprises. A level of urgency should be introduced to ensure such a bank can be introduced to play a role. As the last speaker said, we must never again have the experience that we have had.

Those of us in public life with constituency offices at the coal-face have a feeling for how desperate many people are. What are the main issues on which we are asked to make representations? I am unsure whether I share this with others but in the main the requests relate to medical cards and social welfare issues, whereas some years ago it was mostly planning and other areas, including housing and so on. Those have gone down the list now and the other issues have been resurrected. That is an indication of the change.

We have seen young people emigrating and we are seeing the devastation that unemployment is creating for people at home. We have seen businesses crash. In a debate on mortgage arrears on 10 July, I raised the issue of the distress that those in serious mortgage difficulty are enduring. I consulted MABS on the issue and therefore my views were not simply hearsay. My statement was based on research done by MABS in this area. I stated, "Most of the people involved, although not all, are male clients of the banks who are dealing with debts that are out of control". I further stated, "People who are in long-term distress are tired and weary, lack confidence, have lost self-esteem and have lost hope". These people are not in a suitable state to negotiate with the banks. I am hearing from more and more people in difficulties with the banks. The come to me not to sort out the difficulty but to know whether I can get the banks to discuss solutions to their problems on a face-to-face basis.

The negative consequences of the recession have hit our city centres and rural towns hardest. Towns play a vital role the social, cultural and economic life of communities throughout Ireland. Many shops and businesses, new enterprises and even some that have been in operation for decades or generations, have been unable to survive the downturn in economic activity, resulting in an increasing number of shop closures and vacant units in our town centres.

The retail sector combined with the wholesale sector play an important part in the domestic economy representing more than 50% of the workforce. In addition to the impact of the recession, upward-only rent, parking charges, commercial rates, rising energy costs and online trading are factors adversely contributing to the feasibility of small and medium-sized businesses in the retail sector. This, in turn, is threatening the fabric of our urban centres.

The Credit Review Office helps SMEs and farm borrowers who have an application for credit declined or reduced and who believe they have a feasible business proposition.

In budget 2014, the threshold has been increased from €500,000 to €3 million for loan appeals to the Credit Review Office from small to medium-sized enterprises, SMEs. This will facilitate requests from a broader range of SMEs, as well as large requests for refinancing.

A full suite of developmental business supports, totalling approximately €2 billion, is available from State bodies and agencies. The Government is developing a comprehensive communications strategy to increase awareness of these supports. This strategy will encompass the revised credit guarantee scheme, with a view to increasing awareness among SMEs. In an effort to improve the framework of credit supports available to SMEs, a new two-day programme with expert mentoring support is being introduced to enhance the financial and business capacity of SMEs. The objective of the initiative is to equip SMEs with the necessary tools to improve their ability to secure financing for their businesses. The programme will be launched on a pilot basis with 1,000 SMEs taking part next year. Work is ongoing with the European Investment Bank, EIB, in developing a tailored and customising trade finance initiative to support the growth of the export sector, to provide much-needed finance to exporters and to restore confidence, support trade and foster growth and employment. Its purpose is to address specific challenges of funding international trade through a broader suite of financial products.

The initial 30% relief available for investment under the employment and investment incentive is being removed from the high-earners restriction for a period of three years. This restriction limits the amount of tax reliefs that can be claimed by high-income individuals. The employment and investment initiative provides that a maximum of €150,000 per annum can be invested by an individual. Therefore, by lifting the restriction on the initial 30% relief, these investors should be encouraged to invest more funds in the employment and investment incentive and to improve the availability of funds to SMEs. The target is to increase investment in Irish SMEs that are focused on job creation and expansion. SMEs are the engine of economic growth, providing more than two thirds of employment in the State and the Government has charged the SMEs State bodies group with the task of implementing initiatives aimed at meeting the needs of Irish business for access to a wide range of bank and non-bank finance, as set out in the Action Plan for Jobs.

First, I welcome the opportunity to speak on this motion. I always welcome an opportunity to speak on a motion tabled by Fianna Fáil pertaining to the country's economic situation, as it gives me a great opportunity to remind its members and the people of who precisely put us into the position in which we find ourselves today. While some people quote literature, I love to quote banking reports and I have to hand the report of the Commission of Investigation into the Banking Sector in Ireland. Its first sentence, which is indicative of what went on in Ireland at the time, states: "Systemic financial crises, like the recent Irish one, require a great number of institutions, enterprises and individuals to simultaneously follow unsound policies or practices." As stated earlier, I welcome the opportunity to speak in the Chamber to be able to remind people precisely who caused the crisis we currently face, as well as to be able to speak on aspects of the motion before Members this evening. It galls me to see a sentence that states Fianna Fáil calls for "improved regulation of licensed moneylenders to protect consumer interests". Had that party done this at any stage between 2000 to 2008, the country would not be in this mess. While Fianna Fáil may mean specific moneylenders as being high street moneylenders, some Members recognise that a bank is also a moneylender, albeit one coming under a different category altogether. Had Fianna Fáil done anything during that period, Members would not be obliged to listen to Deputies McHugh or Neville outlining to the House this evening the impact of the crisis on the ordinary man and woman in the street. This is the reason I love to stand in the Chamber reminding people of exactly what Fianna Fáil's legacy to this country has been.

The strange thing about it is that as a member of the Joint Committee on Jobs, Enterprise and Innovation, I can see what the Government has done since coming into power. I remind the Deputy opposite that on the day this Government came into power, no Irish bank could borrow money in the financial markets. They were completely dependent for their cash on the cash given to them by the European Central Bank, ECB. Only two weeks ago, Bank of Ireland was able to sell a bond worth €500 million that was five times oversubscribed at an interest rate of approximately 3.25% over a seven-year period. AIB has also been in the market accessing credit through the sale of bonds and I reiterate that when this Government came into office, no banks, including Ulster Bank, which has been nationalised by the Government of the United Kingdom, could access credit in the financial markets. Such things have changed. The Government has also introduced a variety of schemes through which funding has been made available for SMEs. If I have a single criticism of the Government, it is its failure to get out the message that so many schemes are available. Representatives of Microfinance Ireland appeared before the aforementioned joint committee earlier this week and the numbers currently accessing those funds are very small at present. On their return to their constituencies at the weekend, I encourage Deputies to take this on board and to promulgate the message that funding of up to €25,000 is available for individuals in microfinance. Moreover, funding is available for SMEs under the various initiatives and schemes that have been introduced by both the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, and the Minister for Finance, Deputy Noonan. I need not list them all out at this point. I reiterate that far better communications in this regard are required.

While it galls me to so do, I agree with Fianna Fáil in its reference in this motion to the increase in bank fees and charges on SMEs and customers. This is having a detrimental effect on small businesses and something should be done in this regard. The unfortunate point in this regard is that during the boom period marshalled by Fianna Fáil, no fees were charged and that was not sustainable either. Again, the Government of the day should have stepped in through the Financial Regulator or the Central Bank to force banks to charge for products. While they should not have done so at the levels they are charging at present, a fee certainly should have been levied because what was going on at the time was completely unsustainable. Since coming into power, I believe the Government has ensured that a crisis that was mitigated and allowed to happen by the previous Administration, led by Fianna Fáil, will not happen again. The Government has put in place strong regulation through a number of legislative items that have been passed since 2011 and this year. In addition, to ensure that a watchful eye is kept, I welcome the choice by the Government of another outside person to replace the outgoing Financial Regulator. I welcome that the person in question has no connections with any banking institution in Ireland and one must ensure that what is being put in place and what is being done at present does not allow the crisis that happened previously to happen again.

I call Deputy Kitt, who has five minutes.

I understand I am sharing time with Deputies Kelleher, Troy and another Deputy. I commend Deputies Michael McGrath and Calleary on tabling this motion proposing the establishment of a State-owned enterprise bank as a permanent solution to the lending gap which exists in Irish banking. They did this most ably yesterday evening. The Small Firms Association has called for the creation of a bank for entrepreneurs and its chairman, Mr. A. J. Noonan, spoke of the major concern affecting his members since the departure of Danske Bank and ACC Bank. Danske Bank has 100,000 personal customers and 10,000 business customers in Ireland. It was the second bank within a week to announce plans to close, after ACC Bank had made an announcement stating it was handing back its banking licence and closing its remaining branches in Ireland.

I had an approach from a third party in the ACC Bank, an employee representative organisation, suggesting that the Government could in some way benefit from the acquisition of ACC's banking architecture and employee skill-set. I put this to the Minister for Finance by way of a parliamentary question to which I received a reply that the officials in the Department of Finance are examining the correspondence and they will respond in due course. The proposal is that the State would buy back ACC Bank from Rabobank. Rabobank purchased ACC Bank from the State in 2002. It has now announced that it will close ACC Bank next year. ACC Bank has a head office and nine regional offices with a total staff of 470 people. It has a big volume of property loans which are in difficulty and it seems that Rabobank plans to outsource these loans to a collection agency. ACC Bank has small business and farmer loans of €310 million covering 2,900 customers and deposits of €110 million covering 5,000 customers. The property loans are additional. The programme for Government provides for the setting up of a strategic investment bank with funds coming from the National Pensions Reserve Fund. The proposal is that ACC Bank has a structure in place that should accommodate the immediate start up and functioning of such an investment bank.

The current state of banking in Ireland cries out for a new initiative, not only to provide finance to small and medium sized business but also to become a competition lever to force the major banks to improve their services. There is widespread public support for action on this issue. It would create a culture of "get up and do" rather one of "wait and see". A Government initiative to take back ownership of ACC Bank and enter negotiations with Rabobank would be welcomed on all fronts. This is the proposal that has been put forward by the employees' representative organisation.

The Small Firms Association has stated that one in four firms is still finding it challenging to access credit. The association has questioned whether the troika's departure will lead to an improved situation for entrepreneurs and small business in being able to access finance and credit. In this regard Deputy Michael McGrath is correct in saying that there should be an examination of the competitiveness of the Irish banking sector. Its current position is bad news for both business and personal banking customers because fewer banks means higher borrowing rates, increased charges and reduced rates for deposits. The Small Firms Association questioned the claim that AIB and Bank of Ireland are lending and promoting what they call "huge grant approved rates". The association has said that banks should re-examine their lending policies and ask why so many loans are approved but not drawn down.

Our motion also refers to the regulation of licensed moneylenders to protect consumer interests and measures to tackle illegal moneylenders. Figures show that 360,000 people have borrowed from licensed moneylenders. They indicate that the number of people taking out high cost loans with moneylending agencies has gown by 20% since 2007, despite the number of licensed moneylenders having fallen from 47 to 40 in the same period. I support the proposal that the imposition of a cap on interest rates on loans could resolve some of the issues around these high interest lending rates. Research has shown that a quarter of people who use moneylenders run into problems paying them back. Outstanding loans are now worth approximately €200 million. We have seen a growth in the number of people taking out loans where the interest rate is above 23%. We should listen to organisations such as St. Vincent de Paul and MABS, who know about the increased number of people who are in difficulty because of moneylending.

I welcome the opportunity to speak on this Private Members' motion and compliment Deputy Michael McGrath on tabling it and having this important and timely discussion. It is taking place against the backdrop of a credit union having run into major difficulties recently and the problems that exist in accessing credit. We have had a debate for a number of years on how to get credit flowing in a sustainable way into the broader economy, not only to small and medium sized businesses, which are the lifeblood of economic activity, but to people who wish to take out a mortgage to purchase a home, and on the difficulties people have in accessing credit for the purchase of a home or for small and medium sized business investment and sustainability.

There is no doubt that our banking system is very impaired. One need only consider the recent withdrawal of banks from Ireland and the revocation of their banking licences. It sends out a very strong message that we are in a perilous state when it comes to competitive activity in the banking sector.

The Government's policy is the pillar bank system with AIB and Bank of Ireland, and the role envisaged for Permanent TSB. It is critically important that we have competition not only in the area of basic charges to customers for handling loans, providing overdrafts, credit cards and so on, but in terms of the competition being dynamic with regard to innovation in how they provide funding to small and medium sized businesses and to people who may want to purchase a home. We can no longer pretend that there is improvement. Of course we want to see the two pillar banks achieve the success that they have been having to date in that their share prices have risen a small bit and there is a small degree of confidence flowing into the economy, all of which is welcome. However, when there is potential growth in an economy there is also a need for credit to fund that growth. We are not talking about bubbles but about a sustainable economic system whereby credit is available to small and medium sized businesses to enable them to invest and reinvest. That is not possible at present.

While the pillar banks are advertising that they are open for business, supporting enterprise and available to provide mortgage facilities for people who want to purchase a family home, that is not evident on the ground. Any cursory look at the statistics with regard to access to credit would show that there is still a deficit of credit available to sustainable business models.

Having learned from experience, banks are trying to extend their capabilities in terms of their personnel. Enterprise Ireland has worked with the two pillar banks on training personnel to be able to access a business plan presented by a small or medium sized business or a company in terms of its sustainability, cashflow, balance sheet and projections as to what it can achieve over a number of years. However, there is a dearth of experienced personnel in the banks to access that. There is still a latent hangover of business plans being assessed on one thing only, namely, its property as opposed to its business model. Even though banking personnel have been moved from A to B and C to D, there is a huge difficulty in our banking system, particularly in AIB and Bank of Ireland, in that area. I urge that this issue be brought to the attention of the banks. They say that they are open for business but the only way they can be there for business is if there have experienced personnel who can assess a business proposal, examine its need for credit and assess its viability, as opposed the current position where it seems that if one is unsure about a proposal or there is a lack of experience in terms of assessing it, the easiest thing to do is to refuse the credit in the first place.

The motion refers to the small and medium sized business sector. The difficulties people have in accessing credit to purchase a home is an indication of the difficulties the banks are in. It is not only anecdotal evidence as it is clear that families are having difficulties in accessing mortgages. What the banks are doing is trying to repair their impaired balance sheets. They are fighting for their lives. AIB wants to get out of State ownership and Bank of Ireland wants to unshackle its connection with the State; they want to return to a position of independence in terms of ownership in order that they will not have to take any more direction from the Government.

In the meantime, when they are trying to repair their damaged balance sheets they are sucking the lifeblood out of the economy. They are required to retain very high capital reserves for lending which gives them a disincentive to lend in the first place. We went from requiring tier one capital of 3% up to 10% or 12% at this stage. That policy is very welcome and is being enforced by the Financial Regulator but it damages the ability of the banks to provide credit because of the capital ratios they are required to retain.

I ask the Government to consider the proposal in the motion. We are only calling for what has been committed to in the programme for Government. We recommend that the Government should carry out its commitment in the programme for Government to establish an access to credit for small and medium businesses by establishing a business bank. To date this commitment has not been honoured. Deputies on all sides of the House agree that we must have a sustainable growth path over the next number of years so that small and medium businesses can access credit if they have a sustainable business plan which stands up to scrutiny. That will force the pillar banks to put their houses in order with regard to providing credit.

The motion calls on the Central Bank to examine the competitive state of the Irish banking sector. It asks for action to encourage non-domestic banks to establish a retail presence in Ireland. It asks for verification that the State-supported banks are fully meeting lending targets. I was on that side of the House for some time and we know and appreciate the difficulties faced by any Government and that there is no quick-fix solution. When a bank is fighting for its survival its only loyalty is to its shareholders and its only interest is to repair its balance sheet. However, there is a broader remit because the banks have received so much State support under the bank guarantee scheme and because they are partially owned by the State. There is a social obligation on banks. The Credit Review Office was established to assess whether banks were meeting their lending criteria as laid down by the guarantee. There needs to be an examination of how banks are performing and meeting the commitments which they are obliged to meet with regard to lending to small and medium businesses and in the area of mortgages, in case that issue is forgotten.

The motion calls for action to improve non-banking sources of funding for the SME sector and for improved regulation of licensed moneylenders in order to protect consumer interests and measures to tackle illegal moneylenders. Credit unions were established in communities throughout the country many years ago in order to allow people to access credit and to prise them away from the grasp of moneylenders, to allow short-term borrowing at affordable rates to alleviate cash flow problems which families encounter from time to time. I accept the credit union movement may have moved away from that policy to a certain extent but the licensing of moneylenders and the inspection of money lending practices must be a priority because many citizens could find themselves in a parlous state if money lending practices are not controlled.

I wish to share two minutes of my time with Deputy Peter Mathews.

Fianna Fáil calls for the establishment of a State-sponsored enterprise bank as a means of addressing the permanent funding gap in the banking sector. This was a commitment in the programme for Government but it has not been delivered. Efforts to encourage non-bank funding has been completely inadequate to date. The high profile announcements about seed capital, loan guarantees and micro-finance have not been matched by delivery of funding. The growth in money lending identified by the recent Central Bank report highlights the need for accessible credit for low income families in particular. Small and medium enterprises are the lifeblood of the economy, representing 99.8% of active enterprise, nearly 70% of all employment in the State and 46% of gross value added in the economy.

Employment in SMEs for the total business economy fell from 1,045,000 in 2006 to 839,000 in 2011 or 80.3% of the 2006 levels. The construction sector was most badly affected where SME employment in 2011 was only 38.9% of the 2006 level, with almost 120,000 job losses. The domestic SME sector is diverse in nature and employs workers with a much wider range of skills than the multinational sector. SMEs can range from a small welding business to a local supermarket employing 100 people. The jobs crisis cannot be solved by focusing on foreign direct investment alone. By supporting the SME sector we are ensuring job opportunities for those with traditional skills as well as for people with technical qualifications.

Another recent budget proposal for a statutory sick pay scheme is impacting on small businesses in County Louth. Viable small businesses in the county are already being strangled by a deepening credit crisis in the sector. A statutory sick pay scheme can only lead to higher employment costs for the 200,000 small businesses in this country employing more than 655,000 people. To impose higher costs on SMEs at a time of an escalating credit crisis in the sector can only mean job losses.

I thank Deputy Kirk and the Fianna Fáil Members for this brief two minutes speaking time. This is a very important and relevant motion. Credit is creative because credit actually gives the energy to business to do what it does, which is to produce goods and services. Debt, by contrast, is usually dead weight and depressing. What has happened in this economy is that we have legacy debt. As I have explained on a few occasions and tried to make the point come home to the Minister for Finance, the dead weight of debt over households, SMEs and other businesses and the Government debt, combined, puts Ireland at the top of a very challenging table. That is what is depressing things.

I worked with ICC Bank for 20 years. It was the development bank which gave money to SMEs under various types of credit such as fixed asset credit and working capital credit and all the rest. The board of the bank did the engineering of that balance sheet correctly. The loans to deposits were correct. When the bank was taken over by Bank of Scotland (Ireland), all those rules of prudential banking were thrown out, as happened in the main banks in this country. As the previous speaker said, they are trying to correct their balance sheets. They are trying to walk through a swamp but the swamp has to be drained and there has to be creditor compression. That means that the legacy creditors, including the eurozone and the euro system, have to do some restructuring and write-down, otherwise the new credit requirements will be snuffed out and smothered.

There is lots more to say but I do not have time. When the foreign banks are exiting that does not bode well. If everything had turned the corner they would be staying here because their historical losses are historical. It begs a question. I say to the Government, to the Taoiseach and to the Minister for Finance, that when they go to Brussels to speak to people like Draghi, they should tear up the long-dated bonds that replaced the promissory notes because that will concentrate their minds. It would be a justified tearing up. It is not doing something wrong; it is morally, financially and in every way justified. Otherwise, as Stiglitz rightly said, because the bankers caused it, we will have ten years of stagnation.

I intend to share time with my colleague, Deputy John McGuinness.

We are all agreed that a well-functioning banking sector is critical to any economy. While there has been massive State support by way of capital, the country still does not have a functioning banking system. I will focus in my contribution on competition and support for SMEs. A Department of Finance study in 2000 reported that more than 80 credit institutions were offering banking services in Ireland of which 11 had a significant involvement in retail banking with branch networks.

In recent weeks, Danske Bank and ACC Bank closed and this followed the closure of Halifax, Postbank, Anglo Irish Bank, Irish Nationwide Building Society and the EBS. We now have a cosy cartel involving two main banks, AIB and Bank of Ireland. This will not be good for business or personal customers because a lack of competition will ensure higher fees and charges, lower deposit interest rates and higher borrowing costs. All we have to do is consider the unprecedented low ECB interest rate, yet variable rate mortgages have increased time and time again in recent years to make up for loss making tracker mortgages.

The problem of tracker mortgages should be tackled as part of an overall review of the future of our banks. The Government should put a case to our European partners for the transfer of these mortgages to a special purpose vehicle with a long-term funding arrangement backed by the ECB. These mortgages pose a particular problem for Permanent TSB, which has an overhang in the region of €15 billion. Perhaps if this was sorted, the revised restructuring plan for the bank, which has been put to the EU Commission, would be approved and we would have a properly functioning, sustainable financial institution with the potential to fill the void in the domestic banking sector.

I refer to the lack of support for the SME sector, which contributes to 70% of all employment and 46% of the gross value added in the economy. This sector has been abandoned by the Government parties. Do they remember their pre-election promise to the retail sector to abolish upward only rent reviews? Like many other promises, that has been broken. There was also a promise to tackle the archaic mechanism for calculating commercial rates but this was also broken. The Government has given a free hand to the energy regulator and there have been three increases in energy prices, which is another cost stifling businesses. It decimated redundancy payments and the sick pay scheme with an increase from three to six in the number of days that employers must cover sick pay. Despite the large scale support the State has given banks, they are not supporting businesses. The Government repeatedly points to all the initiatives it has introduced. To date the microenterprise loan fund has lent a mere €1.62 million. The €415 million credit guarantee scheme was expected to provide €150 million a year lending to small businesses but in the first ten months it has lent only €8.5 million.

I acknowledge progress has been made by way of foreign direct investment but this should not be made at the expense of SMEs, which are the lifeblood of our economy. Funding must be forthcoming to viable and sustainable businesses and the Government should examine our proposal and explore the possibility of establishing an enterprise bank in recognition of the importance of the SME sector to the economy. It is not just our suggestion, as this was promised in the programme for Government. This should be delivered to support SMEs.

Only this week in my constituency the largest exporter of cattle, sheep and pigs, TLT International, went into receivership. The company has operated for 30 years but in the past three years it was unable to access credit from any Irish financial institution and was left with no option but to go to the Hong Kong Shanghai Bank in England to avail of credit. The bank, which is eager to get away from dealing with businesses in this economy, pulled that credit line in the past few days and this has put the company into receivership with the loss of 30 jobs directly and many more indirectly. This is a clear example of how our financial institutions are not working with businesses in the State. Captains of industry and entrepreneurs have ideas. They want to generate employment and create wealth but they are not being supported by the Government or financial institutions. The Government needs to give a clear commitment that it will explore the possibility of establishing an enterprise bank to ensure good ideas are matched with relevant funding.

During this and the previous Dáil, the Government parties made promises to establish a good bank that would fund business but nothing has happened. We went down the road of providing money for the pillar banks and encouraging them to sort out the mortgage issue and to fund the SME sector but the message is coming back to every Deputy and Senator in their clinics that this is not happening. People involved in business say they cannot sort a deal with a bank. They cannot get bank officials to understand the new economy in which they are operating and they cannot get them to deal in a meaningful way with the legacy debt some of them have. They got into difficulty but the business proposal is still sound and the banks refuse to look at them.

Other major banks have left the country. I have not heard a Minister, in particular, the Minister for Finance, advising businesses through the media or any other forum on what to do about new banking arrangements. The Government has not encouraged AIB or Bank of Ireland to look at all the different businesses in difficulty because they need to change banks. KBC Bank advertised in last weekend's Sunday Independent how easy it is to get into a commercial arrangement with a new bank. That is a serious flaw in Government policy. It ignores the plight of small businesses. In America, they are at the centre of the economy. Young enterprises with two or three members are the equivalent of businesses here that have been in families for generations. They are in trouble but while the Government says they are at the centre of economic activity and they are central to the way the economy will rebound to build jobs, it refuses to support them.

Government Members pay lip service to them in the House. When one comes in here from the coalface, one realises it is a bubble of nonsense, spin and whitewash. The Government is not helping the SME sector. Families and individuals are providing sound employment in every parish and town but the State does not support them. We say we do but when we examine the fine print, there is an IDA or Enterprise Ireland client above and beyond the SME sector.

The Government has crucified the retail sector. It has done nothing. A local government Bill is going through the House which will double rates in some county towns. The Government parties have no plan and if they do not bring one forward with money behind it, they will fail all the risk takers who are trying to create wealth and jobs. On every high street, premises and commercial units are boarded up unable to be rented because there is no confidence in the country and it is not being restored among those who have discretionary wealth.

I appeal to the Government to do something for the SME sector. It should act on its words and protect those who are creating jobs and wealth.

I assure the House that this Government will continue to work hard to create an environment conducive to the entry of new entrants to the banking market in Ireland. To ensure there is a level playing field for potential new entrants to the Irish market so that they can compete, this Government has clarified to the markets that we do not want or plan to support the State-supported banks beyond what is absolutely necessary. The industry-wide credit register will allow for the appropriate measure of risk in lending, allowing incumbent and new lenders to lend with full visibility of the risk of that lending. The switching codes for bank customers enhance competition and force banks to work hard to retain their customers. We have encouraged risk sharing partnerships to encourage new lending, such as the AIB-European Investment Bank lending initiative. The Government actively supports potential new entrants and will be open to all inquiries on that front. Competition for banking services is evolving and the Government will continue to lead the debate at EU level on the mechanisms to promote alternative sources of financing.

The Minister for Finance last night outlined the measures taken by this Government to improve access to credit. It was clear that no single measure would provide the silver bullet and so in budget 2014, the Minister for Finance announced a number of new measures to add to and to leverage existing measures, all with the shared goal of improving access to finance for SMEs.

A key announcement in budget 2014 was a comprehensive communication strategy which over the coming months will be rolled out and will raise the level of awareness among SMEs and entrepreneurs of the full suite of developmental business supports available to them. To improve the framework of credit supports available to SMEs, the Minister also announced a subsidised financial training programme for small businesses. This programme will be carried out in conjunction with the Skillnets management works programme and is designed to improve the financial capability of SMEs. Approximately 1,000 SMEs will benefit from this programme in 2014.

As the economy recovers, the Government expects increased demand for the services of the Credit Review Office, which fulfils an important role in assisting borrowers who have been refused credit by the banks. The limit for loan applications that can be appealed to the Credit Review Office was, therefore, raised from €0.5 million to €3 million to facilitate requests from a broader range of SMEs and a larger team of reviewers is now in place. The Credit Review Office is available to assist businesses which have been refused credit and it is currently overturning 55% of the refusal decisions referred to it. Anyone who has been refused credit by the banks should avail of the services of the office.

We will continue our engagement with SMEs to ensure we are making the changes that they need to see in order to grow. The Government's engagement with SMEs comes not only from the views of various representative bodies, but also through the direct access afforded by the credit demand surveys. They use direct and comprehensive contact with SMEs throughout Ireland and across the various sectors of the economy.

In June, the Government announced its decision to establish the Ireland Strategic Investment Fund which will absorb the National Pensions Reserve Fund and activate the NPRF's €6.4 billion of resources, making it available for investment on a commercial basis to support economic activity and employment in Ireland. The Minister for Finance anticipates the enabling legislation will be enacted early next year. Using the Ireland Strategic Investment Fund, we will maximise our resources to enhance growth in the Irish economy and improve key infrastructure to maintain Ireland's attractiveness as a place to do business and to create employment.

Already, in the lifetime of this Government, the NPRF has established funds that support both strategic projects and a number that support SME financing that collectively involve commitments of €375 million. The role of a strategic investment bank over and above the contribution expected from the Ireland Strategic Investment Fund will be informed by the requirements of the economy once the Government's key immediate objectives for the repair of the banking system have been completed.

The rise in people using moneylenders could be a cause for concern taken out of context. However, the Government is conscious that increases in unemployment and reductions in income have impacted on credit worthiness and collateral values, making it more difficult for individuals to obtain loans from conventional sources. In some circumstances, these individuals may turn to moneylenders and it is important that regulators can provide the necessary protections for those consumers.

It should be clear that this Government does not in any way take this issue lightly. This Government has worked hard to introduce measures to ensure that viable businesses, in particular SMEs, have access to credit from a broader range of sources. We will always maintain an open dialogue with SMEs to ensure that their voice is heard and that the correct and most effective solutions are being implemented. The Government is committed to ensuring that an adequate supply of finance is available to meet the requirements of SMEs and households as the economy recovers.

There is not a word in that speech for SMEs.

Excuse me, Deputy. The next speaker is Deputy Ó Cuív.

As far as the Government is concerned, they are out of business.

They were mentioned-----

They were mentioned. That is all the Minister of State did. Give them the money.

I can understand the frustration of my colleague, Deputy McGuinness, because it is clear the Government has never set up or run businesses. Many of the solutions put forward as solutions to the business sector strike me as being way too timid and do not face up to the real issue. If we are serious about creating employment, we want money, and I am not talking about microfinance. One will not set up serious businesses with microfinance. Setting up businesses is an expensive business, and I know that from practical experience.

I do not understand the antipathy towards having a State bank. It is not only among this Government but it has been there within this great system which seems to run this country and which Governments fall for. I would go as far as to say that one of the great mistakes of the past 20 years was to get rid of the ACC and the ICC.

I will tell a little story with a funny twist in the tale. When I went to Connemara, I wound up as a co-op manager with a committee and €3,500. We got a grant to set up the co-op and a business to try to get a good market for hill lamb. We applied to the bank - I think it was AIB - but even though we were getting a substantial grant, we were refused. We then applied to the ACC. I realised that unless the State bank was a little bit more adventurous than the private bank had been, my goose would be cooked before I got anything going in the co-op and I did not like that prospect. I was very young at the time; I was in my early 20s.

I decided not to take any chance the second time, so we made the application to the ACC but I decided to go one step further and telephone the chairman of the ACC whose day job was managing director of Clover Meats.

The Minister of State got it in one but he is pre-empting me. I said to the secretary who answered the telephone that my name was Éamon Ó Cuív and I asked to speak to Mr. Michael Collins. I started to explain to him that I was a co-op manager in Connemara but he interrupted me and asked me if I was Emer's son. I said I was and he told me to tell my mother he was asking for her because the two of them knew each other when they were children growing up in Blackrock. That Michael Collins, of course, was a nephew of the Michael Collins whose picture hangs in the front hall of this House. Luckily for us the ACC gave us the money.

Members will have heard of the acorn.

The site we bought for £1,250 now supports over 300 jobs. The company has moved on into all kinds of other areas. The Minister of State will have heard of ECC Teoranta, which is one of the bright lights of this sector. In fact, the central part of its building is the lamb-fattening station we built. It is one of the success stories of Údarás na Gaeltachta, Connacht Gold, P. J. Fahy and all the other co-op businesses in Corr na Móna.

It is interesting to think that if we had not had a State bank, we would not have those jobs now. P. J. Fahy would not have been able to build up the hugely successful industry that has developed since he took over TDS from the co-op many years ago and started ECC Teoranta. If somebody had not taken a chance, the jobs at the top of the hill at the back of the mountain in Connemara would not exist. That is why I strongly believe there is a need for somebody to put it up to the private banks in this economy. That need was there in the past. I am sure that many businesses would not exist if they had not been supported by the ACC and the ICC. Many farmers were able to develop their businesses because they were given prudent loans by those institutions in circumstances in which the private person would not have gone in. I know I am not the only person who went to a State bank and made a success that continued into the future.

The money does not have to be that big. When I was in government, I argued with my colleagues that we should take some money from the National Pensions Reserve Fund and give it to the good bank part of the IBRC to start lending into the productive sector. I said there should be an absolute ban on using that €2 billion or €3 billion in State money for lending for property for property's sake. In other words, no loans should be provided in respect of a building unless it is connected to a productive unit. Until we provide for such a system, we will continue to be at the mercy of the over-conservative view of the two so-called pillar banks. A small amount of money would make a significant difference in this area, as in all areas of life. I have no doubt that such a bank would put it up to the pillar banks to compete because that is the nature of life.

I would like to mention a second matter I consider vital on the basis of my experience of trying to develop businesses without having enough capital. One cannot develop any substantial type of business from nothing without share capital. It is often the case that young, vibrant, educated and creative people with the best of ideas do not have cash or capital. They cannot do it all on borrowings because borrowings require immediate repayment and accrue interest. The second big thing I learned was that one needs investment funds. There is no point in going to investment bankers in private investment funds when one has a start-up business because one might as well forget it.

Tá áthas an domhain orm go bhfuil an tAire Stáit anseo anocht. I put it to the Minister of State, in light of all the talk about the use of the National Pensions Reserve Fund to invest in the economy, that the western investment fund, under the Western Development Commission, has been one of the most successful investment funds in terms of creating jobs. I would like to repeat here tonight the suggestion I made last summer that the Government should immediately give €100 million from the National Pensions Reserve Fund to the western investment fund of the Western Development Commission, to be drawn down by those involved as they need it. A modest sum of money would keep them going for a long time. We know that the Western Development Commission's investment fund is operating entirely on the basis of returns from previous investments. They are getting their money back from investments that have been successful and they are rechurning it.

If we want rapid growth in investment in the western region, we need to build a good working model of how this can work. I suggest that we already have experts who have shown their skills in picking enough winners. One picks losers as well as winners. If one does not pick some losers, one will not pick any winners. We know they have had enough success in picking winners to get money coming back in at a sufficient rate to enable the money to go around in a circle. If there is €4 billion or €5 billion left in the National Pensions Reserve Fund, €100 million is a drop in the ocean. Having succeeded in accessing that money, it would be very simple to say to the western investment fund that it will be given €100 million. Those involved in the fund would probably tell us it would take three or four years to draw those moneys down, but they would get working immediately on locating developers. In such circumstances, we would have the two things that are needed - loan finance and, equally importantly if not more importantly, investment finance. Then all that would be needed are people with ideas and energy.

The final thing we have to learn in this economy is that we are not always going to get winners. It all has to be worked on a margin. If one is investing money, one has to allow for winners and losers. If we are going to continue with a policy in this State that everybody must be a winner, we will have no winners because nothing will get off the ground.

I welcome the opportunity to speak at the conclusion of this debate. The message from the beginning of the debate right through to the end is that we all recognise that accessing credit remains very difficult for businesses and personal customers throughout the country. The continuing decline in the number of banks operating in the Irish economy, particularly in the retail sector - it has decreased again recently - will increase costs for businesses and individuals and will reduce choice and competition in the banking sector. Most people recognise the importance of credit for small and medium sized businesses, which have a key role in sustaining economic recovery and supporting job creation. I will not repeat the statistics about the number of jobs created in small businesses compared to large businesses. Everybody knows that hundreds of thousands of people are working in small and medium sized enterprises.

It was troubling in recent days to read about the release of a report by ISME suggesting that 57% of its members have been refused credit in recent months. ISME has also reported that the average time taken to process loans has increased from four weeks to five weeks. That is difficult, but the real difficulty is that 31% of ISME members have had their overdrafts reduced. That is the real sickener. If a company is operating on an overdraft of €50,000 and is working up to that limit, it will not be able to pay the following week's wages if that limit is suddenly cut to €30,000. Such actions on the part of the banks are squeezing businesses and business owners. The reality is that in these circumstances, the banks tend to seek more guarantees. They will seek a personal guarantee before they agree to increase or extend an overdraft. They will seek to bring under guarantee any personal assets that are not under guarantee. That gives them more collateral to back up their loans. When they have people fully on the hook with nothing left, they can do what they like and many of them do.

The withdrawal from the Irish market of Danske Bank and ACC-Rabobank has resulted in a loss of competition. We have been left with three banks - AIB and Permanent TSB in one group, Bank of Ireland and Ulster Bank, which is part of the Royal Bank of Scotland group. That group is currently assessing its business model in Ireland. I hope it will stay here because it has had a good history in this country. Ulster Bank should have a bright future here. We know that Permanent TSB is struggling with its tracker mortgages.

A normal competitive banking situation no longer exists in Ireland. That is the most important statement that people have to recognise. The economy is on the mend but the banking system is not matching that. A new force is needed in Irish banking, especially to assist small businesses.

My colleague, Deputy Ó Cuív, mentioned the role of the ACC, which provided great assistance to people in the agriculture and food sectors. I remember when the ICC used to help small businesses. Fóir Teoranta also helped many small businesses through difficult periods and they came out successfully at the far side. They are all gone now. We need a State-backed bank for enterprise to help growing businesses to invest. We need to close the lending gap that now exists in Ireland. There is also an experience gap in the banks because so many of them were heavily involved in the property market for a long time. They have been trying to deal with the mortgage arrears issue for the last couple of months. They do not have the business expertise they used to have many years ago.

Many small businesses have a considerable number of non-core business loans. They may have taken them out for property development, which perhaps they should not have done, but they are tied with them now. These non-core business loans are crippling their businesses and they need to give personal guarantees. Many are having trouble keeping up repayments on these non-core business loans and it is making it difficult even to keep their tax up to date. These loans are starving companies of working capital. We need a mechanism whereby the property loans that are not connected to the day-to-day activity of the business are separated from the business activity, allowing the business to continue to work.

We need a new enterprise bank that concentrates on small businesses and lends up to approximately €5 million. It should not be a grant-giving organisation. It should provide advice to customers on the business environment. There should be a rigorous assessment of the economic prospects of the companies involved. There would be no soft money here, but money available for good and viable businesses. No property loans should be given. It is important that it would be strictly for the core business to ensure businesses can thrive and employment can grow.

Amendment put:
The Dáil divided: Tá, 77; Níl, 51.

  • Bannon, James.
  • Barry, Tom.
  • Bruton, Richard.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Catherine.
  • Byrne, Eric.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Áine.
  • Conaghan, Michael.
  • Conlan, Seán.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Coonan, Noel.
  • Corcoran Kennedy, Marcella.
  • Creed, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Feighan, Frank.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Howlin, Brendan.
  • Humphreys, Heather.
  • Humphreys, Kevin.
  • Keating, Derek.
  • Kehoe, Paul.
  • Kelly, Alan.
  • Kenny, Seán.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • Lyons, John.
  • McCarthy, Michael.
  • McEntee, Helen.
  • McGinley, Dinny.
  • McHugh, Joe.
  • Maloney, Eamonn.
  • Mitchell O'Connor, Mary.
  • Mulherin, Michelle.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • Nolan, Derek.
  • Noonan, Michael.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Mahony, John.
  • O'Reilly, Joe.
  • O'Sullivan, Jan.
  • Perry, John.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Rabbitte, Pat.
  • Reilly, James.
  • Ring, Michael.
  • Ryan, Brendan.
  • Spring, Arthur.
  • Stagg, Emmet.
  • Stanton, David.
  • Tuffy, Joanna.
  • Walsh, Brian.
  • White, Alex.


  • Adams, Gerry.
  • Boyd Barrett, Richard.
  • Broughan, Thomas P.
  • Browne, John.
  • Calleary, Dara.
  • Collins, Joan.
  • Collins, Niall.
  • Colreavy, Michael.
  • Cowen, Barry.
  • Daly, Clare.
  • Doherty, Pearse.
  • Donnelly, Stephen S.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Flanagan, Luke 'Ming'.
  • Fleming, Sean.
  • Fleming, Tom.
  • Grealish, Noel.
  • Halligan, John.
  • Healy, Seamus.
  • Healy-Rae, Michael.
  • Higgins, Joe.
  • Keaveney, Colm.
  • Kelleher, Billy.
  • Kirk, Seamus.
  • Kitt, Michael P.
  • Lowry, Michael.
  • Mac Lochlainn, Pádraig.
  • McDonald, Mary Lou.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • McLellan, Sandra.
  • Martin, Micheál.
  • Mathews, Peter.
  • Moynihan, Michael.
  • Murphy, Catherine.
  • Nulty, Patrick.
  • Ó Caoláin, Caoimhghín.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Smith, Brendan.
  • Stanley, Brian.
  • Troy, Robert.
  • Wallace, Mick.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Seán Ó Fearghaíl and Aengus Ó Snodaigh.
Amendment declared carried.
Motion, as amended, put and declared carried.
The Dáil adjourned at 9.20 p.m. until 9.30 a.m. on Thursday, 14 November 2013.