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Banking Sector Regulation

Dáil Éireann Debate, Wednesday - 20 November 2013

Wednesday, 20 November 2013

Questions (63, 81, 82, 83, 84, 85, 86)

Pearse Doherty

Question:

63. Deputy Pearse Doherty asked the Minister for Finance the arrangements or proposed arrangements that are in place with the German bank KfW to aid Irish small and medium enterprises or other economic sectors. [49749/13]

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Dara Calleary

Question:

81. Deputy Dara Calleary asked the Minister for Finance if the German bank KfW holds or has applied for a banking licence here; and if he will make a statement on the matter. [49823/13]

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Dara Calleary

Question:

82. Deputy Dara Calleary asked the Minister for Finance if a memorandum of understanding is being drawn up between the Irish and German authorities regarding the role that KfW bank will take in making credit available to Irish business; and if he will make a statement on the matter. [49824/13]

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Dara Calleary

Question:

83. Deputy Dara Calleary asked the Minister for Finance the expected level of credit KfW will make available to Irish business; and if he will make a statement on the matter. [49825/13]

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Dara Calleary

Question:

84. Deputy Dara Calleary asked the Minister for Finance if KfW will lend directly to Irish businesses or through Irish banks as intermediaries; and if he will make a statement on the matter. [49826/13]

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Dara Calleary

Question:

85. Deputy Dara Calleary asked the Minister for Finance if he expects KfW to compete directly with the State-supported banks for the provision of credit to small and medium sized enterprises; or if he sees the bank meeting a currently unfulfilled role; and if he will make a statement on the matter. [49827/13]

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Dara Calleary

Question:

86. Deputy Dara Calleary asked the Minister for Finance if the role envisaged for KfW is complementary to an alternative to the programme for Government commitment to establish a strategic investment bank; and if he will make a statement on the matter. [49828/13]

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Written answers

I propose to take Questions Nos. 63 and 81 to 86, inclusive, together.

As the Deputy will be aware, the Taoiseach mentioned in this House last week that he had held discussions with Chancellor Merkel. Germany is keen to help and specifically to find ways to reinforce Ireland’s economic recovery by improving funding mechanisms for the real economy, including access to finance for Irish SMEs. The German Government has asked KfW, the German development bank, to work with the German and Irish authorities swiftly, in order to deliver on this initiative at the earliest possible date.

Officials of my Department, have already exchanged working papers on this subject with KfW and the German Ministry of Finance. We have held a consultation with the German embassy in Dublin which helped pave the way for discussions with the German Ministry which were held in Berlin yesterday and further discussions will be held with KfW and other key stakeholders over the coming weeks both here and in Germany.

I am keen to see the establishment of a healthy and balanced relationship. As we are trying to ensure that any initiative that comes out of this process is as effective as it can be, we will be discussing approaches that meet the strategic objectives of both States and ultimately facilitate lending to the real economy, in particular SMEs in Ireland. This relationship may take the form of a Memorandum of Understanding or a contract or indeed we may formalise that relationship in some more appropriate fashion.

KfW’s model in Germany is to lend through commercial banks. Whereas in the case of their agreement with Spain they provided a loan to ICO, the Spanish state investment bank who then lent the funding on to the commercial banks in Spain. All appropriate options will be considered in the course of the discussions with KfW for the Irish case.

KfW hold a banking licence in Germany and under the rules of the EU can passport into Ireland if this was deemed necessary without a requirement to obtain an Irish banking licence. I should note that KfW’s IPEX bank (its Import Export Bank) notified the central bank of its intention to passport into Ireland in January 2008. However, this is unrelated to the recent announcement.

As the Deputy will be aware, the Government has decided to establish the Ireland Strategic Investment Fund (ISIF) which will absorb the National Pensions Reserve Fund (NPRF). 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. Officials of my Department are currently preparing the necessary legislation which I anticipate will be enacted early next year. Already, in the lifetime of this Government, the NPRF has established funds that support both strategic projects and a number that support SME financing.

Further assessment of the need to create a Strategic Investment Bank over and above the contribution expected from the ISIF 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.

We have not set targets for any Strategic Investment Bank as its role has yet to be fully defined and due to State Aid considerations its potential market is likely to be somewhat prescribed. Experience in other countries suggests that any lending facilitated by a state investment institution like KfW or an Irish State Investment Bank is generally complementary to lending already taking place in an economy and can in fact assist commercial banks with access to cheaper credit lines such as from the European Investment Bank.

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