Banking plan targets credit flow to SMEs - Minister O’Keeffe

30 March 2010

The banking recapitalisation plan announced today contains explicit provisions targeted directly at supporting our enterprise sector and freeing up credit for small to medium-sized businesses, according to the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD.

Speaking in the Dáil this evening on a motion in support of the Government’s actions on the Irish financial system, Minister O’Keeffe said the banking sector will be required to lend to the SME sector as part of the recapitalisation plan.

‘Under the terms of today’s recapitalisation plan, Bank of Ireland and Allied Irish Banks will be required to make available more than €3 billion in new SME lending to include working capital this year and next year.

‘This figure will be reviewed on an ongoing basis as the needs of the economy change.

‘The two banks must each produce a plan that includes a sectoral and geographic breakdown of how they intend to divide up this new lending.

‘As part of his remit, the credit reviewer, John Trethowan, will assess these plans following which the Government will decide whether further action on sectoral targets is required.

‘In addition, the two banks will need to make available €20 million each for seed capital to be provided to Enterprise Ireland-supported ventures and to make up to €100 million each available for environmental, clean energy and innovation funds.

‘That is in addition to the €100 million each made available in accordance with the previous recapitalisation scheme.

‘The two banks will be required to commit resources to work with Enterprise Ireland and the Irish Banking Federation to develop sectoral expertise in the modern growth sectors of the economy.

‘They will be required to explore with Enterprise Ireland and the Irish Banking Federation how best to develop the range of banking services that Irish SMEs trading internationally will need and to develop expertise and bring forward new credit products in areas where expected cash flow, rather than property or assets, is the basis for business lending.

‘I welcome the formal establishment of Mr Trethowan as credit reviewer to provide for an independent review of decisions by participating institutions to refuse or withhold credit to SMEs, farm enterprises and sole traders.

‘This facility should afford individual businesses an opportunity for third-party review of bank refusals to grant credit.

‘Participating institutions are required to comply with the recommendation of the reviewer or explain why this would not be appropriate.

‘Statistical outcomes for each bank will be made public.

‘These measures and more reinforce the Government’s commitment to supporting businesses, especially SMEs - a key priority for me as Minister for Enterprise, Trade and Innovation,’ said Minister O’Keeffe.

He said the Government’s plan will restore our banks to fit-for-purpose institutions that can support economic development and the growth of enterprise.

‘Our actions today are necessary for the longer term economic stability of our nation which has been recklessly undermined by irresponsible property lending practices and corporate sector greed,’ said Minister O’Keeffe.

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