Dáil Éireann Debate, Tuesday - 23 June 2020
71. Deputy Martin Heydon asked the Minister for Finance the assessment of expected losses incurred by banks across microbusinesses, small businesses and medium businesses, respectively, once the period of forbearance is lifted at the end of September 2020; and if he will make a statement on the matter. [12324/20]
View answerAs the Deputy is aware there is an unprecedented level of uncertainty around the outlook for the Irish economy currently. The macro-financial outlook is inextricably linked to the pandemic, and the ultimate outcome will be determined to a significant degree by the effectiveness of the public health measures and the extent to which medical advances can diminish or eliminate the virus.
Currently the level of losses that will be experienced on loans to local companies is not possible to estimate as the public health crisis continues to evolve. Companies have needed, and will continue to require access to liquidity and, in some cases, solvency support to reduce the risk that the productive capacity of the economy is permanently damaged.
In this regard I have introduced a series of measures and supports to help businesses including the Temporary Wage Subsidy Scheme (TWSS) and the proposed ‘warehousing’ of certain COVID-19 related tax debts to support businesses immediate cash flow challenges.
Furthermore, together with my colleagues the Minister for Business, Enterprise and Innovation, Ms Heather Humphreys and the Minister for Agriculture, Food and Marine, Mr Michael Creed, Government announced a package of measures aimed at supporting businesses and farmers of varying sizes and with varying needs including the provision of grants and loans, in relation to, working capital, longer-term finance and business advisory supports. A comprehensive list of these measures can be found at: https://www.gov.ie/en/service/63d47e-government-supports-for-covid-19-impacted-businesses/
Banks’ loan losses will be mitigated to some extent by the Government supports that have been provided to firms. I also welcome the role that the domestic banking system has played in supporting liquidity needs of households and businesses so far in this crisis, including through payment breaks.
COVID-19 will put pressure on banks’ financial position, but improved resilience, supported by recent policy actions, results in a banking system that is now better able to absorb, rather than amplify, such a shock. The Central Bank of Ireland and the European Single Supervisory Mechanism have built up, and now released, capital requirements on banks in response to the COVID-19 shock, which will allow banks to absorb potential loan losses, as well as reducing the risk of a drop in credit supply. The Irish domestic banks do not possess limitless capacity to support the economy and the absorb losses that will inevitably stem from the COVID-19 crisis. The degree to which is dependent on the severity and duration of the economic shock, which is itself is dependent health situation and societal restrictions.
I can assure the Deputy that I will continue to work with my Department, the Central Bank, other Government Departments and their agencies to maintain financial stability and a robust economy.
