Dáil Éireann Debate, Thursday - 13 March 2014
57. Deputy Michael McGrath asked the Minister for Finance the impact to date of institution-specific performance targets for covered banks set by the Central Bank of Ireland to move distressed small and medium-sized enterprise borrowers on to longer-term solutions; the amount of SME debt covered by these targets; and if he will make a statement on the matter. [12680/14]
View answer59. Deputy Michael McGrath asked the Minister for Finance the latest information he has on the amount of small and medium-sized enterprise debt outstanding in the country; the amount that is in arrears; the amount classified as non-performing; and if he will make a statement on the matter. [12682/14]
View answerI propose to take Questions Nos. 57 and 59 together.
The 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 is 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. The Central Bank's statistics on SME lending provides a breakdown of outstanding debt across a number of different industries. SME credit to non-property, non-financial private-sector enterprises fell by 6.2 per cent (€1.6 billion) in the year to end-Q4 2013, to stand at €24.5 billion. This represents a decline of 3.1 per cent (€771 million) over the quarter as these SMEs continued to repay more debt than was drawn down. SMEs accounted for 67 per cent of all non-financial, non-property credit. The Central Bank does not publish figures on arrears or non-performing loans specific to the SME Sector.
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 the Minister for Finance 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. Given the scale of the economic crisis that was inherited by this Government this clearly represents considerable progress in such a vital sector of the economy.
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 adressing their debt situation.
In conclusion resolving the issue of SME debt in a mutually acceptable manner and that affords benefits not only to parties involved the SMEs and the banks but also to the wider society and economy has been, and remains, a key priority for this Government.
