Dáil Éireann Debate, Tuesday - 27 November 2012
193. Deputy Bernard J. Durkan asked the Minister for Finance if in response to the lack of adequate credit to the hotel industry, he has had any discussions with the lending institutions with a view to addressing this issue; and if he will make a statement on the matter. [53074/12]
View answer195. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which a lack of credit to the transport and tourism sectors is currently deemed to negatively affect national economic performance; if he has in mind any specific proposals to address any such issues; and if he will make a statement on the matter. [53078/12]
View answer255. Deputy Brendan Griffin asked the Minister for Finance if his attention has been drawn to the lack of credit availability in the economy; the measures he will take to rectify this fundamental problem in the economy; if his attention has been drawn to the public fury regarding the failure of the banks to release credit despite the huge sacrifices by the Irish people here to bring about a properly functioning banking system; and if he will make a statement on the matter. [52937/12]
View answerI propose to take Questions Nos. 193, 195 and 255 together.
The Government has imposed SME lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their 2011 targets. The Head of the Credit Review Office (CRO), Mr John Trethowan, stated in his recently published ninth quarterly report that “€3.5bn of sanctions for each bank is a very challenging target, however the remaining five months typically show more lending activity and I am of the view that, after a slow start to the year, the targets will be a challenge but still may be achieved.”
As the Deputies are aware, one of the key priorities of the Programme for Government is to ensure that an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme. The Economic Management Council meets the banks on a regular basis and discusses the key issues pertaining to this priority.
In addition to the lending targets imposed on the banks, the pillar banks are required to submit their lending plans to the Department and the Credit Review Office (CRO) at the beginning of each year, outlining how they intend to achieve their lending targets. My Department, in conjunction with the CRO, subsequently analyses the plans and meets the banks to discuss any issues of note. The banks also meet with my Department and the CRO on a quarterly basis to discuss progress. The monthly management meetings with the pillar banks also provide a forum for the issue of SME lending to be raised by my Department.
I should stress however that the Relationship Frameworks with the banks provide that the State will not intervene in the day-to-day operations of the banks or their management decisions including with respect to pricing and lending decisions. These frameworks are published on my Department’s website at http://banking.finance.gov.ie/presentations-and-latest-documents/.
In terms of rejection rates from banks, I would remind the Deputies that the CRO can review decisions by the pillar banks to refuse, reduce or withdraw credit facilities, including applications for restructured credit facilities, from €1,000 up to €500,000. The CRO is overturning 55% of the refusal decisions referred to them and I would appeal to SMEs and farmers who have been refused credit by the banks to avail of the services of the CRO.
The overall target for lending to SMEs includes lending to the tourism, transport and hotel sectors. The Government is conscious that these sectors need access to credit. In his seventh quarterly report, the Credit Reviewer notes that whilst each banks’ balance sheets have contracted recently, the monitoring of these figures show that no sector or geographic region has been adversely disadvantaged by either of the banks.
The Deputy should be aware that the Microenterprise Loan Fund Act provides for a scheme which will facilitate up to €40million in additional lending to microenterprises over the next five years. Furthermore, the Government is in the process of facilitating up to €150m per annum of additional credit through the Temporary Partial Credit Guarantee Scheme, designed for SME’s who, because of lack of collateral or because of the specialised sector they operate in, face difficulties in accessing bank credit.
It is vital that the banks continue to make credit available to support economic recovery. However, it is not in the interest of the banks, businesses or the economy for finance to be provided unless the business is viable and has the capacity to meet the interest payments and repay the sum borrowed.
