Lowry concerned about ‘lack of transparency’ in lending intended for SMEs

TD claims banks used banking corporation money to improve their balance sheets

Independent TD Michael Lowry. Photograph: Nick Bradshaw

Independent TD Michael Lowry. Photograph: Nick Bradshaw

 

Taoiseach Leo Varadkar will raise with Minister for Finance Paschal Donohoe claims that banks are using money intended to provide for credit to small and medium-sized enterprises (SMEs) to instead improve their balance sheets.

Mr Varadkar said it was essential that “any public body should operate solely within the legislation passed by this House to provide for it”.

He was responding to Independent TD Michael Lowry who said there was “unease over the lack of transparency” about the scheme operated through the Strategic Banking Corporation of Ireland (SBCI).

It received €1.24 billion to provide credit to SMEs and €675 million was allocated to AIB, Bank of Ireland and Ulster Bank, the Independent TD said. By the end of 2016 the banks had retained €112 million, which improved their balance sheets, he added.

The Tipperary TD claimed that 84 per cent of the funding went towards car leasing, hire purchase and property restructuring which was asset-backed lending as opposed to its intended purpose of working capital lending. “This type of lending was never envisaged by the Act.”

He said the 2016 published accounts for SBCI, 11 per cent went to working capital and 5 per cent (€27 million) went to clear the debt of three foreign banks, ACC, Danske Bank, Lloyds Bank of Scotland, and a further bailout of Anglo Irish Bank and Irish Nationwide Building Society.

Criteria

He also alleged that neither the banks nor the five other successful lenders who received funds met the established qualification criteria.

There was, he said, “no transparency as to where the money was going and the purpose for which it was used internally in banks”.

He added that two of the non-banking lenders that received €91 million in funding “are headed up by former senior executives of failed banks”. And one of them received a further €30 million in equity from the National Transport Management Agency (NTMA), the parent company of the banking corporation.

Mr Lowry said that given the enormous sums of money involved, representatives of the banking corporation should be called before the finance or another appropriate committee to establish what kind of oversight or assessment had been conducted by the Department of Finance.

He asked if the State was getting value for the “expensive administration overheads of the SBCI”.

The Taoiseach agreed the banking corporation should attend before an appropriate committee. He said he was not au fait with the inner workings of the strategic banking corporation. He said the corporation “does not aim to maximise profits but aims to provide cheaper funding on better terms to small business”.

He said since it started in March 2015 until June 2017 the corporation lent €855 million to 21,000 Irish companies employing 100,000 people.

Mr Varadkar added that as well as AIB, Bank of Ireland and Ulster Bank, the non-bank lenders were Merrion Fleet, First Citizen Finance, Bibby Financial Services Ireland and Fexco asset management.

The Taoiseach said 23.2 per cent of funding had gone to the agricultural sector and 85 per cent of funding went outside Dublin.