The Taoiseach has given the clearest confirmation yet of the Government’s u-turn on the establishment of a Strategic Investment Bank, according to Fianna Fáil’s Senator Marc Mac Sharry. The Taoiseach in a letter to Fianna Fáil Deputy Billy Kelleher has stated that: “the concept of a Strategic Investment Bank would be difficult to implement in current market conditions.”
Senator Mac Sharry commented: “The new Government has performed many cynical u-turns since taking office so today should come as no surprise. The much vaunted Strategic Investment Bank, the central plank of the Labour’s Party’s economic election platform, is the latest in a long line of high profile policies being quietly abandoned.
“The Labour Party pledged to the people in February that a new state bank would be established by the Government, funded by approximately €2.8 billion from the Pension Reserve Fund, to act as an investment vehicle for projects to enhance infrastructure, boost growth and generate employment.
“Labour also pledged that the new bank would channel much needed start-up and scale-up finance to the SME sector.”
“However, as Fianna Fáil pointed out at the time, the SIB was quietly demoted as it became increasingly clear that the Government was adopting and promoting the banking policy of the last Government – policy which they vehemently opposed at the time.
“Joan Burton’s project was dealt the final blow today when the Taoiseach confirmed that the SIB is not on anyone’s agenda.
Please find below the full contents of the Taoiseach’s note of this afternoon.
28 September 2011
In the House this morning you raised the Strategic Investment Bank with me.
As you know, the Programme for Government includes a commitment “to create a Strategic Investment Bank that will become a provider of finance to large capital projects, a conduit for venture capital and a lender to SMEs.” This will involve accessing resources from the NPRF and will need to be reflected in the approach taken.
Given the current economic and banking environment, it is vital to ensure that adequate levels of capital are reaching the SME sector and that investment in infrastructure is delivered. This is a prerequisite for delivering long-term sustainable economic growth in Ireland.
In the short-term, the concept of a Strategic Investment Bank would be difficult to implement in current market conditions. It is therefore proposed initially that the objective is best delivered by applying a number of solutions that are targeted at particular segments of the SME sector and in infrastructure, as part of a Strategic Investment Fund.
In respect of SMEs and certain infrastructure investments, such solutions would take the form of a series of investment funds operating under an umbrella fund – the Strategic Investment Fund. This would provide greater flexibility and speed in the early stages than a stand-alone bank.
The National Pension Reserve Fund will be a cornerstone investor in the sub-funds and will attract third party investors, thereby increasing the size of the total investment.
One of the functions of NewERA will be to ensure the establishment of the Strategic Investment Fund by the NPRF to develop commercial investment opportunities, including in the following critical areas:
corporate lending and asset financing for SMEs
capital restructuring of SMEs
venture capital funds
infrastructure investment funds
It is envisaged that each sub-fund would be set up in line with investment industry standard practice and have specific investment objectives, a third party specialist manager and investment from both NPRF (as a cornerstone investor) and third party commercial investors (who are prepared to invest alongside a strong local investor).
The NPRF would take a lead role in the development and implementation of each sub-fund. This model will build on existing successful activity in the venture capital area (Innovation Fund Ireland).
Enda Kenny TD