I propose to take Questions Nos. 161, 162 and 177 together.
Some indicative information on the extent of property investment in the SME sector can be garnered from the Red C survey of credit demand covering the period April to September 2012 conducted on behalf of my Department, which found that
“A relatively small number of SMEs (16%) claim to have purchased property using bank debt since 2005. This is similar to the number seen in the previous wave.
At the same time even fewer SME Directors (8%) have purchased property financed by bank debt, secured on the business, since 2005.”
However, it is the case that, in his past reports on the adherence by Bank of Ireland and AIB to the lending targets, the Credit Reviewer has highlighted the property debt overhang as a potentially constraining issue for SMEs. Some of these debt issues may be addressed in the context of the Personal Insolvency arrangements which are coming into force shortly for those debts held by insolvent business holders in a personal capacity. Where the debt overhang is a core debt in the business itself, the debt may be reviewed in the context of restructuring strategies for SME debts which are being implemented by the financial institutions with the oversight of the Central Bank.
During the first quarter of 2013, the Central Bank of Ireland formally advised the covered banks of the specific Key Performance Indicators and metrics for the SME Distressed portfolios that they are required to submit on a quarterly basis. By the end of June 2013, the Central Bank will set quarterly institution-specific performance targets for covered banks to move distressed borrowers onto longer-term solutions. The targets set will reflect the banks’ capacity, processes and systems.
All of the actions taken by my Department to ensure credit availability for SMEs such as the lending targets, the establishment of the Credit Review Office and the work of the State Bodies Group apply to all SMEs, including those who may have property related debt. The Temporary Partial Credit Guarantee scheme which addresses the situation where the SME is outside the risk appetite of the banks may also be relevant to property related debt.