Strategic Banking Corporation of Ireland Reinforcing Irelands Economic Recovery. SFA Business Bytes : 14 October 2015

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1 Strategic Banking Corporation of Ireland Reinforcing Irelands Economic Recovery SFA Business Bytes : 14 October 2015

2 Ireland and State banks: A brief history ACC Bank: founded in 1927 to provide financial support to the Business and Agricultural sectors, sold by the State to Rabo Bank in Both institutions enjoyed long histories of support for the economic development of the State enabling key developments to take place in industry and agriculture. This left the State at a disadvantage to other countries that retained such support mechanisms and led in time to the creation of a number of initiatives including the SBCI, the Credit Guarantee Scheme, Microfinance and the Credit Review Office ICC Bank: Set up in 1933 to encourage investment in Industry, initially modelled on ACC. Sold by the State to Bank of Scotland in 2001 Following the sale of both organisations and the closure of the Export Credit Guarantee supports there were no mechanisms for the State to specifically support credit provision for SMEs going into to the crisis. 2

3 The SBCI has been created to address this gap by: Channelling low cost European finance to the Irish economy Using low cost finance to help attract new entrants into the SME lending market. Providing market support to ensure accessible, flexible and more affordable loans are available to SMEs as required to restore confidence and encourage growth Developing support mechanisms that react to Irish market conditions and that will be supportive even if further market downturns occur. SBCI s overriding objective is to Reinforce Ireland s economic recovery by improving funding mechanisms for the economy 3

4 What is the SBCI? The Strategic Banking Corporation of Ireland ( SBCI ) is a limited company Owned by the Minister of Finance Governed by an independent Board of Directors Set up to source low cost long term finance from multilateral finance providers and State resources Managed by its own dedicated team Now backed by EIB, KfW and ISIF with 800 million of low cost long term loans 4

5 How is the SBCI supporting the recovery? The SBCI uses an onlending model It provides the low cost long term liquidity as raw material to credit providers, who then compete to deliver this to the SME market This approach drives competition as opposed to setting out to be the competition. This means it does not lend directly to SMEs The SBCI works with banks and non-bank credit providers and charges them all the same price for its funding. 5

6 SBCI on-lending model 6

7 First SBCI products launched in February 2015 Loan s designed for working capital and investment purposes. SME loans can be for terms of up to 10 years, lowering monthly repayments and positively impacting SME cash flow. Upper loan limit is 5m. SME working capital loans will be for a minimum 2 year term. Agricultural investment loans are designed to support investment in the productive capacity of the farm enterprise. Loans available though SBCI initial on-lenders AIB and Bank of Ireland. 200 million of funding available to refinance facilities from banks exiting the Irish market. 7

8 Delivery of funding two different approaches AIB 200 million facility Single price for all SBCI loans up to 5 million Bank of Ireland 200 million facility Single discount on pricing across all SBCI loans from 25,000 up to 5 million 8

9 SBCI has made good progress to date 9

10 Next steps: SBCI is set to support non-bank lenders to deliver Invoice discounting SBCI to boost capacity of existing providers SME Vehicle Finance SBCI to boost capacity and enable local small players to compete effectively with banks and international providers with lower costs of capital. SME Asset Based Financing SBCI to enable the entrance of one or more international platforms to the Irish market with a competitive cost of capital. SBCI is also ready to support entry of new broad based SME lending platforms to the market. 10

11 Contact: Nick Ashmore Tel: