Peadar Tóibín
Question:164. Deputy Peadar Tóibín asked the Minister for Finance the initiatives that his Department has put in place in order to assist businesses who are among those with €25 billion worth of impaired loans. [19132/13]
View answerTuesday, 21 May 2013
Questions (164, 182)
Peadar Tóibín
Question:182. Deputy Peadar Tóibín asked the Minister for Finance the steps taken to ensure that all enterprises have access to affordable credit. [18626/13]
View answerWritten answers
I propose to take Questions Nos. 164 and 182 together.
I am informed by the Central Bank that the main SME lenders in the Irish economy have SME exposures of greater than €50bn in aggregate, c.50% of which are classified as in “distress”. For the avoidance of doubt, the Central Bank has indicated to me that these c. €25 billion of loans are ‘distressed’ loans which relates to loans that are graded as ‘Watch’/ ‘Vulnerable’ or Impaired based on the banks’ internal credit grading system - i.e. not all are impaired.
During the first half of 2012, the Central Bank of Ireland commissioned a review by external consultants of the distressed SME operations in BOI and AIB. This review examined areas such as organisational structure, staffing (skills & resources), work-out strategy and execution ability.
Following the outcome of this review the Central Bank commenced a project in the second half of 2012 to drive the effective and timely resolution of the SME distressed loan portfolios through improved bank management of distressed loans and appropriate workout strategies. The priority is to ensure that the banks implement longer term resolution strategies on a case-by-case basis. This also incorporates property debt overhang.
A key focus of the project is to ensure that banks adopt a proactive approach to the management of distressed SME loans via appropriate restructuring on a case by case basis and identifying property debt resolution strategies, where required.
During the first quarter of 2013, the Central Bank of Ireland formally advised the covered banks of the specific Key Performance Indicators and metrics for the SME Distressed portfolios that they are required to submit on a quarterly basis. By the end of June 2013, the Central Bank will set quarterly institution-specific performance targets for covered banks to move distressed borrowers onto longer-term solutions. The targets set will reflect the banks’ capacity, processes and systems.
The Government recognises that SMEs are the lifeblood of the economy and will play a vital role in the recovery of employment growth in our country. It also recognises that businesses with legacy debts may be viable. 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 Government has taken a number of actions, particularly where SMEs have been refused credit, to improve the situation in relation to credit availability to SMEs.
At national level, the Temporary Partial Credit Guarantee scheme addresses the situation where the SME is outside the risk appetite of the banks. This can arise because the SME’s lack of collateral or the banks’ lack of understanding of the business model, the market, the sector or the technology. The three main SME lenders are all participating in the Guarantee scheme. In addition, the Microenterprise Loan Fund Scheme will provide loans of up to €25k to start-up, newly established, or growing microenterprises employing less than 10 people, who have commercially viable proposals that do not meet the conventional risk criteria applied by banks.
The Government has also been active at national and European level to promote and develop non-bank avenues of credit for the SME sector. Enterprise Ireland has a range of initiatives and programmes available for businesses at various stages of the growth cycle. The NPRF has put a number of funds in place to help meet SME financing needs in Ireland:
Details of the schemes can be found on the websites of the relevant bodies, as well as on the Department of Finance website at http://banking.finance.gov.ie/wp-content/uploads/State-Financial-Support-for-SMEs.pdf, a document which consolidates the State supports available for SMEs.
In addition, my Department has produced the first in a series of information newsletters dealing with credit and funding issues for the Small and Medium Enterprise (SME) sector. The newsletter provides information on the various State and private initiatives aimed at increasing the SME sector’s awareness of and access to credit and funding, as well as focusing on positive stories from the sector.
The Government has also led, at European level, efforts to promote and develop non-bank avenues of credit for the SME sector. In December 2012 the Department of Finance hosted a High-Level Workshop on Non Bank Funding of Growth and Jobs in Europe, and the report of this event is now available on the Department’s website. Ireland’s commitment, during its EU Presidency, is to facilitate and encourage the development of an appropriate set of policy options that will support long term financing of growth and employment in Europe, with the provision of capital to SMEs a key aspect of this. In this context the Irish Presidency is fully supportive of the Commission’s work in this area as highlighted by the publication in March of a Green Paper on Long-Term Financing of the European Economy. The Irish Presidency ensured that the issue of long-term financing, including non-bank funding, was discussed at the Informal ECOFIN in Europe. It was agreed at the ECOFIN that the Economic and Financial Committee of the European Council would be asked to progress this issue.