Varadkar: Banks need 'skin in the game' to avoid reckless lending through Covid credit guarantee scheme

Varadkar: Banks need 'skin in the game' to avoid reckless lending through Covid credit guarantee scheme
Tánaiste Leo Varadkar. Photo: Gareth Chaney/Collins

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar has defended the Government’s decision to take on 80% of the risk under the Covid-19 Credit Guarantee Scheme saying it was important for the banks to “have some skin in the game.” 

The Government cannot force the banks to lend to businesses he told RTÉ radio’s Morning Ireland, so it was important for the bank to have 20% of the risk otherwise there would be no disincentive for reckless lending, he said.

The €2bn Covid-19 Credit Guarantee Scheme will be the largest credit guarantee scheme for businesses in the history of the State and will provide low-cost loans to businesses impacted by the virus.

Mr Varadkar said he will be meeting with all the banks this week to discuss the scheme and he felt the best approach was to trust and verify that what is promised is delivered on. The Government does not have the legal power to force the banks to lend, but businesses would have recourse to the Credit Review Office, he said.

On the Pandemic Payment, Mr Varadkar said that it will be phased out as “it would not be affordable to keep it forever.” He pointed out that some people would be better off on regular social welfare payments, especially if they have dependents.

The idea is to regularise the situation over time and to bring payments back in line with regular Job Seekers payment. A full suite of measures to assist the hospitality industry will be implemented shortly, he added.

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