Léim ar aghaidh chuig an bpríomhábhar
Gnáthamharc

Credit Availability

Dáil Éireann Debate, Thursday - 2 February 2012

Thursday, 2 February 2012

Ceisteanna (76, 77, 78)

Bernard J. Durkan

Ceist:

74 Deputy Bernard J. Durkan asked the Minister for Finance if any evaluation has been carried out of the extent to which business sector borrowing requirements continue to be met in cases in which a number of banking institutions have withdrawn from this economy; if any particular investigations or steps have been taken to ensure the availability of the necessary funds to meet the borrowing requirement of businesses so affected; and if he will make a statement on the matter. [6120/12]

Amharc ar fhreagra

Bernard J. Durkan

Ceist:

75 Deputy Bernard J. Durkan asked the Minister for Finance the extent, if any, to which the level of lending by the various banks has been monitored over the past three years to date, with particular reference to meeting the working capital requirements of the small business sector; if such requirements are being met in full, partially or not at all; if the latter, the extent of the effect on the economy; and if he will make a statement on the matter. [6121/12]

Amharc ar fhreagra

Bernard J. Durkan

Ceist:

76 Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he can secure agreement from the banks to meet the borrowing requirements of the business sector, having particular regard to the fact that recapitalisation came at a cost to the economy and the taxpayer and that there is an expectation that in the current economic climate the normal borrowing requirements of the business sector must be met; and if he will make a statement on the matter. [6122/12]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 74 to 76, inclusive, together.

The banking system restructuring plan creates capacity for the two Pillar Banks, Bank of Ireland and AIB, to provide lending in excess of €30 billion in the next three years. SME and new mortgage lending for these banks is expected to be in the range of €16-20bn over this period. This lending capacity is incorporated into the banks' deleveraging plans which allow for repayment of Central Bank funding through asset run-off and disposals over the period to 2013.

The Government has imposed lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both have indicated that they have achieved their 2011 targets.

In terms of monitoring the level of lending, both pillar banks provide my Department and the Credit Review Office (CRO) with annual lending plans outlining in detail how they will achieve the lending target for SMEs. Both pillar banks also produce quarterly reports which incorporate figures for sanctions and drawdowns by SMEs. In addition, the pillar banks also provide monthly figures on balance sheet volumes, sanctioned facilities and regional and sectoral breakdowns of their SME lending. The data contained in these reports is reviewed and analysed by the Department of Finance and the CRO to ensure that the banks are compliant with the terms of the Government recapitalisation as it relates to the provision of credit for SMEs. In addition, the Economic Management Council will meet on a frequent basis with the pillar banks to discuss a range of issues in relation to SME business including the availability of credit to this important sector.

As regards evaluating whether business sector borrowing requirements continue to be met, my Department commissioned an independent survey of demand for SME credit, the results of which will inform policy decisions in this area. The report was based on responses from 1,506 SMEs and covered the period April-September 2011. The survey showed that:

Demand for Credit

36% of SMEs surveyed requested credit;

64% did not request credit;

Most demand was for cash flow and working capital purposes.

Reasons for not requesting credit

80% did not need it or have sufficient internal reserves/funds;

7% thought or believe the banks are not lending.

Decisions on credit

54% of credit applications were approved;

23% of credit applications were declined; and

23% of credit applications are still pending.

When the pending applications are excluded, the approval rate is 70%.

The full report is available on the Department of Finance website. A follow up survey will be conducted in April 2012 to cover the period from October 2011 to March 2012, with the outcome published shortly afterwards.

In conjunction with the Minister for Small Business, Mr John Perry T.D., the Head of Banking Policy Division in my Department will be holding a series of regional meetings around the country to discuss access to bank credit with key local stakeholders. The purpose of the meetings will be to allow the Minister to hear at first hand the views and experiences of local business representative groups, local bank representatives and state agencies on access to bank lending. These will complement the information provided by the credit demand survey and better inform the design and implementation of future Government policies on credit to the SME sector. The first of these meetings will be held on 3 February in Dundalk and Dublin.

Barr
Roinn