Dáil Éireann Debate, Wednesday - 27 May 2020
455. Deputy Michael McGrath asked the Minister for Business, Enterprise and Innovation the purpose of placing a 50% portfolio cap on the credit guarantee scheme; the portfolio caps on each guarantee scheme run by other EU countries in response to Covid-19 in tabular form; and if she will make a statement on the matter. [8014/20]
View answerThe new €2 billion COVID-19 Credit Guarantee Scheme forms a significant component of the Government’s strategy to aid SMEs in these difficult times by providing critical support to ensure businesses are facilitated in having access to credit facilities to assist a return to a more regular trading environment.
It will provide an 80% guarantee on lending to SMEs until the end of this year, for terms between 3 months and 6 years. The guarantee can be used for a wide range of lending products between €10,000 and €1 million that have a maximum term of 6 years or less. The implementation of this Scheme will require primary legislation, the drafting of which has been approved by Government, and my officials are already working with the Office of the Parliamentary Counsel on this drafting work.
My officials are also currently engaged with the European Commission in seeking approval for the Covid-19 Credit Guarantee Scheme and ensuring the Scheme's adherence to the rules set out in their Temporary Framework.
The Credit Guarantee Scheme operates using a portfolio approach whereby the entirety of a participating finance provider’s qualifying finance agreements in respect of which guarantees have been given will be treated as a single portfolio under this Scheme. The portfolio of each financial provider is subject to a percentage portfolio cap which is set in the Credit Guarantee Act, 2012, as amended. The portfolio cap under the current Credit Guarantee Scheme is 13%. It is currently proposed to increase the portfolio cap for the Covid-19 CGS to 50%.
An increase in the level of the portfolio cap will provide lenders with a higher incentive to offer facilities under the guarantee while at the same time the exposure to the exchequer and the risks associated with these loans will be shared between the Government and the financial providers.
Comprehensive information regarding the portfolio caps on each credit guarantee scheme developed by other EU countries is not publicly available as different countries do not always publish this information. I assure the Deputy that the scheme for Ireland has been designed to provide much-needed access to finance for a wide range of businesses which are currently under financial strain arising from the Covid-19 crisis.
