SME lending set for boost with launch of Strategic Banking Corporation of Ireland

Ireland’s small business sector is set for a significant lending boost with the unveiling of a part-German supported €800m state bank, the Strategic Banking Corporation of Ireland (SBCI).

Germany’s Finance Minister, Wolfgang Schaeuble arrived in Dublin on Monday, along with the head of the European Investment Bank (EIB), Werner Hoyer, for a joint signing ceremony officially launching the bank.

The SBCI was announced last May and is to provide finance for small and medium-sized firms under favourable lending terms.

As part of the scheme, existing High Street banks will borrow from the SBCI and lend to SMEs. Banks will be required to assess the risk of lending and maintain that risk throughout, although lenders must demonstrate that the lower cost of sourcing the funds is passed on to SMEs.

The lower cost is essential to avoid a breach of European state-aid rules.

Funding will initially arise from German development bank, KfW, the Ireland Strategic Investment Fund (ISIF) and the European Investment Bank (EIB).

A spokesman for Ireland’s Finance Minister, Michael Noonan said the signing will allow for the money to be released.
Lending is likely to commence before the end of the year, with a memorandum of understanding thought to be close to being signed by the two main banks.

The new chief executive of the SBCI will be the first head of a state-owned bank since the recession to be hired without being subject to a formal €500,000 salary cap.

The head of the SBCI will be hired under the umbrella of the National Treasury Management Agency (NTMA), where John Corrigan’s €416,500 annual salary is the highest currently paid to any member of staff.


Image: ECB

Date published 3 Nov 2014 | Last updated 3 Nov 2014