Government Launch New Bank for Lending to Businesses

A new bank called the Strategic Banking Corporation of Ireland (SBCI) has been launched by the Government today (May 22nd) . It is planned that the new company will make over €500 million of new credit available to Irish small businesses . The government say that the new  SBCI will provide loans that are currently “not typically offered in Ireland” – with longer payback times or lower rates.

The new “bank” won’t have branches – so any loans it makes will be administered by existing Irish banks or other institutions.   It will be run by the National Treasury Management Agency. (Who also  run NAMA)

The new bank will be financed  initially by the German state owned Promotional Bank KfW as well as the the European Investment Bank (EIB) with the rest of the  funding coming  from the recently launched Ireland Strategic Investment Fund (ISIF) (see below).

The  Ireland Strategic Investment Fund (ISIF) is really just the new name for the  The National Pensions Reserve Fund .  The ISIF only came into existence earlier this year after the NATIONAL TREASURY MANAGEMENT AGENCY (AMENDMENT) BILL 2014 was passed.
The new ISIF has more scope to use the pension reserve funds on a commercial basis in  areas of productive investment in the Irish economy in order to support economic activity and employment.

The Pension Reserve Fund’s main focus originally was to prefund social welfare and public service pensions  . The Government say that whilst the need for the State to provide for future social welfare and public service pensions has not ended – they think that  fostering economic activity and employment is currently a greater priority. They hope that by investing in this way it will put the State in a better position to meet its pensions obligations in the longer term. Let’s hope they are right.

The National Pension Reserve Fund (NPRF) was used to fund BOI and AIB to the tune of about €20 Billion in 2011. As at  31 December 2013, the NPRF was valued at €19.8 billion – but that included  €11.2 billion invested in Irish Banks.