Dáil Éireann Debate, Tuesday - 8 April 2014
40. Deputy Pearse Doherty asked the Minister for Finance the actions he is taking to protect the viability of small and medium enterprises which are overburdened with debt due to property assets; the contact he has had with the ECB on the issue; and if he shares the views of Professor Morgan Kelly on the issue of SME debt. [16068/14]
View answerThe 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.
In June 2013 the Central Bank, in consultation with the European Central Bank, set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers, including those who are overburdened with debt due to property assets, 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 enactment of legislation to allow small companies (as defined by the Companies Acts) to apply to the Circuit Court for examinership and the ongoing 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.
I am informed by the Central Bank that a meeting has taken place between Professor Morgan Kelly and representatives of the Central Bank, but I am not privy to the details of any such meetings conducted by the Central Bank.
The remarks by the UCD academic Professor 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. It is important to highlight that the ECB Comprehensive Assessment will not get into loan restructuring. The objective of the review is focused solely on determining whether the banks have enough provisions against their loans and capital. Irish banks have just undergone such an exercise, their second in less than three years, which led to a substantial increase in their loan loss provisions at year end. As I have stated previously, I do not anticipate any capital issues for the Irish banks arising from the Comprehensive Assessment.
