Speech by the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, to Dáil Éireann in favour of the Government’s actions on the Irish financial system

30 March 2010

A Cheann Chomhairle.

The Government’s actions today are the culmination of painstaking analysis and detailed consideration of what is necessary to 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.

I commend the efforts and hard work of my colleague, the Minister for Finance, and his officials, in bringing these banking solutions before the House.

The parallel announcements earlier today by the National Asset Management Agency and the Financial Regulator set the full context in which the Government is making extra resources available to some banks.

Let us be clear that no Irish person wants to carry the burden placed upon us by reckless bankers - but the fact is that without a functioning banking system our full economic recovery would not be possible.

We need adequately resourced and financially sound banks to support the financial needs of businesses and householders.

Similar to the earlier recapitalisation scheme, the Government has again included in this recapitalisation plan explicit provisions targeted directly at supporting our enterprise sector, especially small to medium-sized enterprises.

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 requited 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.

In my own Department, close to €1 billion has been made available last year and this year in the capital budgets of the enterprise development agencies to fund financial supports to enterprises, including SMEs.

Enterprise development agencies such as Enterprise Ireland, IDA and the County and City Enterprise Boards have continued to help businesses through their grant and advisory schemes.

Last year, we introduced the Enterprise Stabilisation Fund which aims to support viable but vulnerable companies in financial difficulty as a result of these unprecedented economic times.

Companies receive funding to support a range of activities, including market development, productivity improvements and development.

Last year, €58 million was spent on 181 projects supporting roughly 7,500 jobs.

The fund continues to attract a high volume of applications this year.

The employment subsidy scheme was launched last August to keep in jobs workers who might otherwise have been made redundant.

Other initiatives included developing intellectual property assets; mandating comprehensive strategy reviews in IDA Ireland, Enterprise Ireland and Shannon Development; establishing a code of conduct for business lending to SMEs; and setting up a credit supply clearing group.

As well as that, work is ongoing on a targeted loan guarantee scheme and we have secured a commitment by central government to pay its debts to businesses within 15 rather than 30 days.

We have secured the introduction of a pay-related social insurance exemption for employers creating new jobs this year and we are targeting funding in new growth areas such as green enterprise.

We are investing significantly in science and technology and among my key priorities as Minister is to deliver on the relevant recommendations of the Innovation Taskforce published by the Taoiseach earlier this month.

We will continue to put in place training and labour market activation measures to help those without jobs and we are increasing the number of places on community employment schemes.

And while the Government takes decisive steps to right the wrongs of our bankers and property speculators and put this economy back on track, the Opposition sounds out the populist soundbite in an effort to win plaudits on the cheap.

Fine Gael wants a national recovery bank that would have no way of generating funds because the good loans it is supposed to buy from the banks are already being used as collateral for funding from the European Central Bank and international markets.

So, Fine Gael is proposing that a new bank that cannot access funds would be able to lend to the real economy.

No country in the world has established a bank such as that proposed by Fine Gael because it would be folly - even for Enda Kenny - to set up a bank that cannot fund itself.

The question the deputies opposite must answer is how they propose to get credit flowing to businesses and householders.

We all know that banks have curtailed lending - mainly because banks themselves are finding it hard to access funds.

That is because the providers of funds are reluctant to deposit their money in banks whose balance sheets are questionable.

What NAMA will do is remove that uncertainty and allow the banks to attract sufficient funding again.

None of the parties opposite have come up with a workable proposal to achieve that.

The fact is that without NAMA there will be no credit.

Having stabilised our public finances, we are now moving to the next stage - stabilising our banking system.

The new fully integrated Central Bank structures will restore confidence in our regulatory regime and in the management of banks here at home and on the international markets.

Our banks should be extremely grateful for the resolve of the Irish people to intervene to save the economy and ensure a return to growth.

Their forbearance and the courageous actions of this Government are putting this country on the road to recovery.

And when this period of Irish history comes to be written, it is my firm belief that it will be recorded in favour of those courageous enough to do the right thing in the national interest.

Go raibh maith agaibh.

ENDS/ETI2185