Dáil Éireann Debate, Tuesday - 15 June 2021
57. Deputy Rose Conway-Walsh asked the Minister for Finance if businesses have seen their credit scores reduced during the Covid-19 pandemic; the potential impact this could have on their ability to borrow; and if he will make a statement on the matter. [31790/21]
View answerI want to ask the Minister about businesses that have had their credit scores reduced during the Covid-19 pandemic and the potential impact this could have now on their ability to borrow. Given the extremely difficult year and a half we have been through, and the huge impact it had on many businesses as they have seen unprecedented restrictions on their ability to operate, what assurances can the Minister give to businesses and sole traders about their credit rating for the future?
One of the Department’s main concerns is to ensure that SMEs have access to sufficient lending or liquidity and that access to credit for SMEs is maintained. The Government has announced a range of measures to assist companies to deal with the consequences of the Covid-19 restrictions and to ensure that they have access to sufficient liquidity.
Lenders are obliged, under the Credit Reporting Act 2013, to submit information to the Central Credit Register, CCR. Submissions of information to the CCR must be consistent with the arrangements agreed and in accordance with lenders' obligations under the Credit Reporting Act 2013. The CCR does not produce credit scores. Rather, the information on a credit report provided by the CCR is factual in nature and the information is provided to the CCR by lenders. It contains no guidance, recommendation or prohibition for lenders on what decision they should make on an application for credit or repayment arrangements agreed with borrowers. Subject to complying with applicable law and regulatory requirements, it is a matter for lenders, of course, to make their own lending decisions in accordance with their own credit policies and risk appetites.
The Central Bank, as the regulator, has advised lenders that in their reporting to the CCR, they will need to apply judgment, for example, around whether a restructure has been agreed in response to an identification of financial distress and should be reported as such. The Central Bank’s SME regulations also set out the required treatment of SMEs by regulated entities with regard to the various aspects of business lending. This includes detailed provisions around the credit application process, requirements regarding security, credit refusals and withdrawals, the handling of complaints, the managing of arrears and having in place policies for engaging with SMEs in financial difficulty.
I thank the Minister. I believe that misses the point a bit in terms of how extraordinary the situation is in which businesses found themselves. When we were at the beginning of the pandemic, absolutely suddenly and without warning, revenue streams were cut off from businesses. Yet, as the Minister knows, they had many fixed costs and bills they had to pay. Many businesses could not pay those bills at the time in way that they normally would. They found themselves, therefore, having to default on debt.
What does the Minister have in place for those businesses? I know and welcome the business supports that came thereafter for businesses at that particular time. I do not want a situation where businesses now find that they are up and running, at last, but need an overdraft or a loan and find that they cannot get that because of the credit rating being downgraded, through no fault of their own, from what it was at the beginning. They need assurances for that. I know the Minister will agree that we need to save every possible viable but vulnerable business we can.
I respectfully suggest to the Deputy that I do not believe my answer missed the question she put to me. She asked me a question about credit scores.
I made the point that we have credit records rather than credit scores and I outlined the way in which that would be dealt with by banks and by the regulator. A point on which I agree with the Deputy is that we, of course, want to put in place the supports, and we have put them in place, to give every business that is viable but currently vulnerable every prospect of being able to survive this awful pandemic.
In terms of the engagement I have had with the SME community on this matter, I have not, to date, seen the demand for additional borrowing one might expect. The array of business supports we have put in place and the direct payments from the State have meant the demand for credit has not been as high as I would have expected. I will keep the issue under review because I believe we will get to a point at which the demand for credit will grow. I am confident we have a banking system that can recognise the difficulties SMEs were in during the pandemic and will still be in a place to lend to companies that are in a position to take on that additional debt.
I appreciate what the Minister said. However, I have been contacted by business owners to say that, when they looked at their credit rating, they found it had been impacted because of their inability to meet bills, particularly at the beginning of the pandemic. This is something of which we need to be aware and on which we need a quick response to ensure every business that can will be able to stay open. Given the employment those businesses create and their importance for towns, small and large, and rural areas, we need to keep them open. I ask that the Minister take this point on board and recognise there are problems in respect of credit ratings. We do not want those problems to increase if we are to support people in going forward to trade out of the horrific time they have been through.
I very much agree with what the Deputy said. In towns and villages throughout our country, there are small businesses that are even more important now than they normally would be. That is why the Government has put in place so many supports to help them. It is why we have the warehousing of tax liabilities and an employment wage subsidy scheme that is due to continue until the end of this year. It is why, when small businesses leave the Covid restrictions support scheme, many of them will receive a significant payment to help them with their reopening. It is for all these reasons that we are yet to see what the demand for borrowing might be. My view is that demand will develop, if it does develop, later in the cycle of recovery. Of course I will keep the issue under review but from the work the Central Bank is doing at the moment and from the work I see our banks doing, I believe all is being done to meet every credit need that is sustainable and affordable for businesses that are trying to reopen at the moment. I expect the demand for credit is yet to come.
