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Departmental Budgets

Dáil Éireann Debate, Tuesday - 17 November 2020

Tuesday, 17 November 2020

Questions (167)

Catherine Murphy

Question:

167. Deputy Catherine Murphy asked the Tánaiste and Minister for Enterprise, Trade and Employment the way in which his Department’s annual amount for contingent liability is set; the factors considered when setting contingent liability; if forecasting is undertaken regarding setting future amounts; the contingent liability figure for his Department for 2020; and if the contingent has been utilised to date in 2020. [36901/20]

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Written answers

In my Department, contingent liability arises from the Credit Guarantee Scheme (CGS) and the COVID-19 Credit Guarantee Scheme (CCGS). Both are underpinned by the Credit Guarantee Act 2012. These are important loan schemes which remove the requirement of collateral for businesses in loans which can be used for liquidity and investment purposes.

The CGS has operated since 2012 with variations in the level of contingent liability. Its current annual contingent liability is set out in S.I. 70 of 2017, Section 4(2). Here, the maximum annual lending amount is €150 million with a risk share of 80 percent. It further indicates that the aggregate amount liable to be paid by the Department of Enterprise, Trade and Employment is set at 13 percent. This results in a maximum annual contingent liability for the Department of €15.6 million. One claim of €89,000 was received in 2020 so far under the 2015 CGS Scheme. In 2020, no other claims have been received.

The CCGS was passed through both Houses of the Oireachtas in July of this year as a scheme to establish stability to the lending market as a result of the COVID-19 health emergency. Since its launch on the 7th of September 1,817 applications for over €104 million have been received by the three participating banks. More lenders are being evaluated and will be coming online over the next weeks. In order to give businesses certainty, €2 billion was agreed by government as the size of the Scheme. With no portfolio cap and a risk share of 80 percent, the contingent liability is a maximum of €1.6 billion. My Department assumes the liability for all but primary producers for whom liability will be with the Department of Agriculture, Food and the Marine.

Forecasting was conducted within my Department with input included from the expertise of the credit departments of the participating finance providers. €25 million was set aside in Budget 2021 for the contingent liability for those businesses covered by the Department of Enterprise, Trade and Employment. Since the Budget, the European Commission’s State Aid Temporary Framework, which underpins the legal parameters of the CCGS has been extended from the end of 2020 to the 30th of June 2021. This should allow more Irish businesses to access finance at reduced interest rates through the Scheme but may have implications for increased demand on the contingent liability levels. As a result, my officials are reviewing the level of liability set for 2021.

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