John McGuinness
Question:198. Deputy John McGuinness asked the Minister for Finance the loan to value ratio that will be used by the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46080/14]
View answerTuesday, 2 December 2014
Questions (198, 199, 200, 202)
John McGuinness
Question:199. Deputy John McGuinness asked the Minister for Finance if personal guarantees will be required by the Strategic Banking Corporation of Ireland. [46081/14]
View answerJohn McGuinness
Question:200. Deputy John McGuinness asked the Minister for Finance the conditions required in order to access the finance provided by the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46082/14]
View answerJohn McGuinness
Question:202. Deputy John McGuinness asked the Minister for Finance if applicants to the Strategic Banking Corporation of Ireland will be required to have a current tax clearance certificate in order to access finance; and if he will make a statement on the matter. [46084/14]
View answerWritten answers
I propose to take Questions Nos. 198 to 200, inclusive, and 202 together.
As the Deputy will be aware, section 2 (b) (ii) of the Strategic Banking Corporation of Ireland Act 2014 lays out the purposes of the SBCI and empowers the SBCI to lend to SMEs through on-lending enterprises. It is the on-lenders who will assess the risk of the loan propositions from their customers.
The SBCI is based on a common and successful on-lending model that is used across Europe and further afield for example by Germany's KfW and Spain's ICO. The on-lending model has many advantages over direct lending and is designed to ensure that as much of the benefit of the SBCI's lower funding cost is passed onto SMEs. This helps the SBCI to maintain a lean operation and avoids as much operational overhead as possible. Also, the SBCI can better deliver on one of its key goals i.e. that of diversifying the SME finance market by operating as an wholesale lender rather than entering the SME finance market directly. The SBCI's focus is to facilitate the funding of new entrants to this market in order to expand the range and profile of SME lenders in Ireland. As a result, enhanced sustainable competition in the SME finance market is very likely to improve the terms and conditions offered by finance providers to SMEs.
As the Deputy will be aware, Section 8 of the Strategic Banking Corporation of Ireland (SBCI) Act 2014 mandates the SBCI to design credit facilities that meet the needs of SMEs. The SBCI will take account of market conditions for SME financing as part of its operations. If SMEs are having difficulty in particular sectors, the SBCI is mandated to design products which address any such difficulties. In this way the SBCI can facilitate the provision of sufficient prudent finance to fund the commercial activities of SMEs throughout the economy.
All funding to SMEs from the SBCI will have to adhere to EU State aid rules. SMEs in accepting an SBCI loan through a lending partner will be expected to confirm that the funding provided does not exceed its three year de minimis State Aid allowance.
Tax Clearance Certificates will not be required by the SBCI directly from SMEs and any possible conditions attaching to loans such as a loan-to-value ratio or personal guarantees are for the SBCI's lending partners to determine as part of their risk assessment criteria. It is important to note that the SBCI's lending partners' hold the risk of the individual SME loans.