Dáil Éireann Debate, Thursday - 13 March 2014
43. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the availability of credit and debt management continues to be an issue for small and medium-sized enterprises; the extent to which his Department continues to monitor such requirements; his proposals for resolution; and if he will make a statement on the matter. [12690/14]
View answerThe Government recognises that SMEs are the lifeblood of the economy and play a vital role in the continuing recovery of employment growth in our country. Government policy since 2011 has focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources. Similarly for a number of viable smaller and medium sized enterprises the capacity to access financing is constrained by debt overhang, particularly in relation to property exposures.
Restoring confidence and unlocking the demand for the finance that is required to invest in growth necessitates a coordinated and focused strategy for facilitating debt restructuring. The challenges facing SMEs in Ireland accessing credit are the product of a complex interplay of demand and supply side factors. Demand factors are clearly critical in determining the relative lack of credit extended to SMEs in Ireland, particularly for those businesses that are operating within the domestic sector.
Reduced demand for credit has been reaffirmed in a series of independent credit demand surveys that have been commissioned by the Department of Finance since 2010. The most recent Department of Finance SME Credit Demand Survey highlighted that the marked improvement in trading conditions with improved turnover, profit and staffing across different sizes and types of SMEs has not, as yet, translated into an increase in demand for credit. The next credit demand survey will begin at the end of March 2014 and will cover the six month period October 2013 to March 2014. In order to support SMEs the Government has developed a suite of State-sponsored financing instruments that provide a broader range of capital, equity and debt funding across all stages of the business cycle.
Furthermore, measures to promote access to finance amongst SMEs, including measures relating to debt restructuring, are a central feature of the Government's Action Plan for Jobs 2014. The APJ 2014 includes an integrated action plan that includes a series of measures designed to:
- Increase new lending
- Increase participation in Government sponsored initiatives
- Develop new sources of funding
- Increase awareness of Government measures and initiatives to support SMES and
- Enhance the financial capability of SMEs.
Debt overhang and SME arrears are issues which impact on the ability of a SME to meet its existing commitments as well as hindering its ability to secure additional credit which it may need. In June 2013 the Central Bank set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers onto longer-term forbearance solutions. The targets set reflect the banks' capacity, processes and systems. The Central Bank has informed me that the banks have reported that they have met their required targets to date. This perspective has been reaffirmed by both the IMF and the European Commission who report that the workout of SME arrears is progressing and that imposed targets are being met.
Irish banks are well advanced in restructuring their SME loan books. Bank of Ireland indicated in their recently published results that they had reached resolution in 90% of distressed SME cases. Similarly the AIB's results indicate a resolution level of approximately 65%. It is also worth noting that defaulted loans for both banks have reduced year-on-year.
The Central Bank's process of assessing financial institutions in their efforts to move distressed SME borrowers onto longer term sustainable solutions is an important element in assisting SMEs to potentially transition from a distressed to a more sustainable state and will continue in 2014. Additionally, the Government's decision to fast track legislation to allow small companies (as defined by the Companies Acts) to apply to the Circuit Court for examinership, the Irish Banking Federation's new Protocol on Multi Banked SME debt and the on going work of the expanded Credit Review Office are all initiatives that will assist viable SMEs in addressing their debt situation.
I should stress that the Credit Review process remains available to any SMEs whose credit has been reduced or withdrawn by AIB or Bank of Ireland as well as when credit is refused by them. I would strongly advise any SME whose credit is reduced or withdrawn to avail of the services of the Credit Review Office.
In conclusion the Government remains committed to the SME sector and sees it as key engine of ongoing economic recovery and growth. Consequently the Department, working with the other relevant departments and agencies, will continue to monitor both the availability of credit and the process of debt management with a view to taking appropriate actions as warranted to ensure that SMEs in Ireland have the opportunity to reach their full potential in terms of growth and employment generation.
