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Action Plan for Jobs

Dáil Éireann Debate, Tuesday - 25 March 2014

Tuesday, 25 March 2014

Questions (215)

Stephen Donnelly

Question:

215. Deputy Stephen S. Donnelly asked the Minister for Finance if the planned survey of demand for small and medium enterprise credit, as outlined in action 206 of the Action Plan for Jobs, will be brought forward as a result of the recent comments by Professor Morgan Kelly on the precarious situation facing these entities over the coming period; and if he will make a statement on the matter. [13173/14]

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Written answers

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. 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.

As the Deputy is aware, one of the commitments contained in the "Access to Finance" chapter of the Action Plan for Jobs 2014 is to undertake a survey of the demand for SME credit in Q2 and Q4 2014. My Department has commissioned biannual independent reports on the demand for credit by SMEs since 2011. These are the most comprehensive surveys of SME credit demand in Ireland and cover over 1,500 respondents. The next survey will cover the period October 2013 - March 2014 and is due for publication in May.  I will not be bringing forward the survey as it is important to ensure consistency in terms of the periods in which the surveys take place.

As regards the issue of SME debt it should be noted in the first instance that the Central Bank does not publish figures on arrears or non-performing loans specific to the SME Sector.  In June 2013 the Central Bank did 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 officials in my Department 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.  

Recently published results from the covered Irish banks indicate that both banks are well advanced in restructuring their SME loan books.  Bank of Ireland's most recent  published results indicate 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 and the on going work of the Credit Review Office, which has been given an expanded remit, are all initiatives that will assist viable SMEs in adressing 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.

The remarks by the UCD academic Morgan Kelly relate to the forthcoming stress testing by the ECB and in this context the Governor of the Central Bank indicated recently that the purpose of the forthcoming ECB stress tests on 128 European banks, which includes Irish banks, was to remove market and government doubts about the ability of banks to absorb losses with their own shareholders funds.  I would again suggest that Professor Kelly would liaise with the Central Bank and share his analysis and findings in relation to his expectations on the potential impact that the forthcoming stress tests may have on the domestic SME sector.

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