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Banking Sector

Dáil Éireann Debate, Wednesday - 24 March 2021

Wednesday, 24 March 2021

Questions (435, 436)

Neasa Hourigan

Question:

435. Deputy Neasa Hourigan asked the Minister for Finance if the transfer of loans from a bank (details supplied) to a domestic or non-domestic financial institution will require approval from the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [14142/21]

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Neasa Hourigan

Question:

436. Deputy Neasa Hourigan asked the Minister for Finance the nature of the process of due diligence for the Strategic Banking Corporation of Ireland in taking a position on the transfer of loans from a bank (details supplied) to domestic or non-domestic financial institutions; and if he will make a statement on the matter. [14143/21]

View answer

Written answers

I propose to take Questions Nos. 435 and 436 together.

As I am sure the Deputy knows, the Strategic Banking Corporation of Ireland (SBCI) is, subject to the Strategic Banking Corporation of Ireland Act 2014, independent in the performance of its functions.  This includes any due diligence procedures.

SBCI operates a number of loan guarantee schemes on behalf of the Department of Enterprise, Trade and Employment and the Department of Agriculture, Food and the Marine.  These are the Agricultural Cashflow Support Loan Scheme, the Brexit Loan Scheme/Covid-19 SBCI Working Capital Scheme and the Future Growth Loan Scheme.  All of these schemes, under which Ulster Bank is an on-lender, involve SBCI providing an 80% guarantee to on-lenders in respect of each loan.  In turn the SBCI receives counter-guarantees from the European Investment Fund.

I am informed by the SBCI that SBCI’s on-lenders are prohibited from selling or transferring the rights of any loans covered by the agreements under each of these schemes without the prior written consent of SBCI.

The Deputy should also be aware that the Covid-19 Credit Guarantee Scheme (CGS) which SBCI implements on behalf of the Department of Enterprise, Trade and Employment involves a direct guarantee from the Minister for Enterprise, Trade and Employment.  Under the bilateral guarantee agreements between the Minister and each on-lender, the consent of the Minister is required in respect of any transfer of loan agreements, which may only be to another on-lender participating in the CGS.

However, I am further informed that it is the understanding of the SBCI that transfer of business from one licenced bank to another under section 33 of the Central Bank Act 1971 would not require any further action, including obtaining SBCI consent under contracts governing those loans.

To date, the SBCI has not received any requests to the transfer of loans from one on-lender to another.

The provision of facilities to on-lenders requires careful credit assessment and operational considerations. I understand that controls are put in place by the SBCI to ensure the creditworthiness of on-lenders is robustly assessed. The SBCI implements a thorough on-lender due diligence, assessment and set-up process ensuring compliance with the governance, credit, legal and tax obligations of the SBCI.  All new on-lending facilities require approval from the SBCI Board.

The due diligence which the SBCI applies to new potential on-lenders includes the assessment of the on-lender credit approval processes and operational governance structures to confirm the adequacy of oversight and control and the capability of the financial institution to manage and report on SBCI backed facilities.

SBCI also undertakes an Independent due diligence assessment for unrated counterparties from a panel of professional firms to confirm the accuracy of the information provided by the prospective counterparty as part of the SBCI due diligence process.

There is a process of ongoing monitoring and review of on-lending facilities with regular review of compliance with covenants and undertakings, and any terms and conditions imposed by the SBCI.

The internal audit report (December 2020) on SBCI due diligence process noted the positive attributes of the design and operation of SBCI due diligence process.

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