Strategic Bank

Strategic Banking Corporation

The Strategic Banking Corporation of Ireland Act, 2014, establishes the Strategic Banking Corporation of Ireland.  Its purpose is to lend strategically within the economy. It is focused on the credit needs of small to medium-sized enterprises in the first instance.  It is intended that in due course, other areas of the economy where credit needs are not being served will be assisted by SBCI.

The Corporation is re-established as a company in accordance with the provisions of the legislation.  The main functions of the corporation are to promote and facilitate the availability of credit in the State, suitable to the needs of borrowers, to encourage effective competition in the provision of credit and to pursue economic development and to contribute to the international competitiveness of the economy.

The Corporation is to provide additional credit in the State in a prudent manner and to source the appropriate funding to allow it to lend.  The Corporation is to seek to improve the credit market in a number of ways and to provide finance to projects that will contribute to economic activities.

Governance

The board of the Corporation constitutes nine persons, including a chairman.  The first members are appointed by the Minister, and subsequent boards are appointed by the Corporation in accordance with the terms of its memorandum and articles of association.

The NTMA is to assign staff to the Corporation, to enable it to carry out its function.  They may also supply treasury services and advice on treasury matters.  It may enter into transactions of a banking nature as an agent of the Corporation.

Funding

The authorised capital of the Corporation is to be provided by the Minister for Finance.  It will issue shares of €10 million to the Minister, such equity to come from the National Pensions Reserve Fund.  The authorised share capital is €250 million or such higher amount as the Minister may decide, up to €1 billion.  If further equity is required, it may issue further share capital in exchange for the conversion of outstanding loans from the fund, out of the central fund, or a combination.

SBCI may obtain funding from a range of sources.  It is to concentrate, initially, on bilateral arrangements rather than market funding. It is intended that it will undertake other funding later.  Equity is to be provided in part by the National Pension Reserve Fund.  The SBCI may borrow up to €4,000,000,000. Guarantees may be made by the State in respect of certain borrowings of the Corporation. In relation to foreign currency, this is to be valued with reference to published exchange rates.

The Minister may give directions to the NPRF commission, which it must comply with. He may direct the NPRF to provide credit to the Corporation and to exercise any rights based on such direction.

The maximum amount of funding which can be provided by the Minister is €5 billion. The board of the Corporation may decide what dividends are to be paid.  There are provisions for Ministerial guarantees up to €4 billion.  The terms of the guarantee must be laid before the Oireachtas, as soon as possible after it has been made.

Accountability

There are provisions for public accountability.  The Corporation must submit accounts to the Controller and Auditor General for audit.  They are to be laid before the Houses of the Oireachtas.  A senior member appointed by the Corporation, whenever required by the Public Accounts Committee or Controller and Auditor General, is to attend and give evidence on matters specified.

There is provision of a number of tax exemptions for the Corporation.  These are applied for so long as the Minister for Finance is to sole shareholders.  There is no tax on the income and gains of the Corporation or its wholly-owned subsidiaries. The Minister may dispose of shares, as he deems appropriate.  Any funds are to go to the Exchequer.

Loan Guarantee

The Loan Guarantee Schemes Agreements (Strategic Banking Corporation of Ireland) Act 2021provides the Minister for Enterprise, Trade and Employment and the Minister for Agriculture, Food and the Marine with the power:

• to enter into agreements with the Strategic Banking Corporation of Ireland (SBCI), with the consent of the Minister for Finance and the Minister for Public Expenditure and Reform, with respect to the provision of financial support to facilitate access to finance for eligible businesses;
• under that agreement, to provide the necessary funding (from Voted expenditure, with the approval of the Minister for Public Expenditure and Reform).

This facilitates the introduction of the Brexit Impact Loan Scheme into the Irish market in mid-2021. This scheme will provide an appropriate access to finance option to SMEs, including those in the primary agriculture sector, to address liquidity issues arising from the impacts of Brexit and to support investment in a post Brexit environment.

Facilitating Finance

Loan Guarantee Schemes Agreements (Strategic Banking Corporation of Ireland) Act 2021 provides the relevant Ministers with the power to enter into agreements with the SBCI for the purpose of facilitating access to finance for qualifying enterprises. Such agreements may include the condition of a financial contribution to SBCI by one or more of the relevant Ministers.

Financial contributions by the relevant Ministers to the SBCI are limited to an aggregate total of €50 million across all active agreements. The €50 million limit will be sufficient to allow for the delivery of the Brexit Impact Loan Scheme, while also leaving some capacity to allow for the Ministers to implement additional schemes concurrently if they wish to do so in the future.