Strategic Banking Corporation is another false dawn for SMEs – Calleary

Fianna Fáil Spokesperson on Jobs and Enterprise Dara Calleary has said the new Banking Corporation legislation being rushed through the Dáil this week is a totally inadequate response to the credit crisis for small businesses.

Deputy Calleary said: “The Government has failed miserably to bring forward the measures needed to get credit flowing to businesses and once again the Government has come up short with the Strategic Banking Corporation.  It isn’t even going to have a banking licence.  Instead it will provide credit to existing banks who are then suppose to lend it on to small business.

“The Government seems to have learned nothing from the mortgage crisis.  It’s put the banks in the driving seat and left businesses without a strong hand to play.

“We know from the manner in which banks have hoarded capital over the last five years that it is likely that they will continue to take a very risk adverse approach to lending.  This means that many firms with viable business propositions will still be denied the capital they need to invest, to grow and increase employment.

“Allowing cheap funding from the Banking Corporation to flow to banks may help their profitability but it will do little to improve credit flow in the economy.  The banks are currently fixated with the ECB stress tests.  Now they’re being handed a position which could improve their balance sheet, why would they refuse that and lend the money back out into the economy.

“We need to break up the cosy consensus that exists in Irish banking that the moment.  That means delivering a real game-changer on credit flow to SMEs.  We are calling for the establishment of a full State-backed Enterprise Bank could be a permanent solution to the lending gap which exists in Irish banking and would lend to any company, regardless of sector or size, provided it can demonstrate its creditworthiness.”

Deputy Calleary added: “SMEs are the lifeblood of the economy, representing 70% of all employment in the private sector.  Their recovery is being strangled by the credit squeeze.  Efforts to encourage non-bank funding have been completely inadequate.  We have seen many high profile announcements around seed capital, loan guarantees and microfinance but all of them have not been matched by delivery of funding.  The Strategic Banking Corporation is not the solution our businesses need and the Government needs to look at this issue again.”