Financial Institutions covered by the government's guarantee scheme have been asked by Irish Finance Minister, Brian Lenihan, to offer their support to the Irish economy by providing surplus liquidity to small- and medium-sized businesses (SMEs).
In meetings with these financial institutions last week, Lenihan urged lenders to provide more credit to SMEs as part of an ongoing effort to help those affected heavily by the financial crisis.
“Today, I have asked the institutions covered by the government’s guarantee scheme to consider the contribution that they can make to the economy through appropriate credit initiatives in relation to small- and medium-sized businesses and otherwise, and to come back to me on this matter within the next ten days," Lenihan announced on November 28.
The meetings followed on from the submission of a report to the government by the Central Bank and Financial Regulator on the financial position of the major institutions participating in the government’s guarantee scheme, in particular regarding their loan books.
While this report remains confidential, Lenihan revealed that its conclusion confirmed the capital adequacy of Ireland's banks. The report also concludes that even in certain stress scenarios the capital levels in these financial institutions will remain within regulatory requirements in the period to 2011.
Lenihan also noted that the government’s guarantee scheme has been successful in safeguarding the stability of the Irish banking sector and in restoring its liquidity position.
Regarding possible investment into Irish institutions, Lenihan said his focus has been to secure a stable and active banking sector which serves the needs of the Irish economy. He claimed that these discussions have been "productive and informative."
He also encouraged those institutions that are in discussions with potential investors to progress these negotiations swiftly. However, he indicated that in certain circumstances it would be appropriate for the state, through the National Pensions Reserve Fund or otherwise, to consider supplementing private investment with state participation.
"The State will consider any such involvement in credit institutions active in Ireland on the basis of objective and non-discriminatory criteria, in accordance with the principles set out in the guarantee scheme. The appropriateness of the state involvement will be assessed on a case by case basis in view of the overarching objective to preserve financial stability, in line with best practice in the EU and elsewhere and consistent with EU state aid rules," he stated.
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