Dessie Ellis
Question:35. Deputy Dessie Ellis asked the Minister for Finance his strategy for creating a sustainable and competitive banking sector. [16062/14]
View answerTuesday, 8 April 2014
Questions (35)
Written answers
One of the key pillars of the Government's Medium Term Economic Strategy, MTES, is making sufficient credit available in the economy and in this regard I am examining a whole series of options for both bank credit and non-bank credit.
A legacy of the financial crisis is that banks across Europe consolidated in order to better match the needs of the economies. This has also been the case in Ireland. I do expect the recovery in the economy will present opportunities for new entrants to be confident in the future profitability of an Irish branch or subsidiary.
This Government continues to work to create an environment conducive to the entry of such new entrants primarily through the implementation of policies to promote economic recovery and employment creation but also through different initiatives to ensure that there is an adequate pool of credit to underpin the recovery. This is a theme common to our EU partners and Ireland has been leading the debate at EU level on the mechanisms to promote, for example, alternative forms of financing for SMEs. It is important though that we establish an environment conducive for banks and alternative credit providers to enter the Irish market and compete.
In this regard:
- we are working to manage and minimise potential market expectations of future State support for the State owned banks which could act as a deterrent to new market entrants;
- we are actively bringing forward new initiatives to promote alternative sources of lending and credit in the Irish marketplace, the most recent example of this being the link with KfW the German State Development Bank;
- we are working to establish equality in the assessment of credit risk through the establishment of an industry-wide credit register to allow for the appropriate measure of risk in lending, allowing incumbent and new lenders to lend with full visibility of the risk of that lending. The Credit Reporting Act was passed at the end of 2013;
- we are working to reduce switching costs to allow customers to move between banks more easily, enhancing competition and forcing banks to work hard to retain their customers on a commercial basis;
- we are in regular dialogue with potential market entrants as they evaluate potential opportunities in Ireland and will be supportive of new entrants as they emerge.
Another key element to supporting credit in the economy is non-bank financing. Ireland needs to develop a more diversified financial system with increased direct capital market financing and a greater involvement by institutional investors and alternative sources of finance. In this regard, the National Pensions Reserve Fund (NPRF), along with third parties, has committed to a number of investments for SMEs, both credit and equity. These include the SME Equity Fund Better Capital, the SME Equity Fund Cardinal Carlyle and the SME Credit Fund Bluebay.