Tuesday, May 21, 2013

Labour's Plan for a Strategic Investment Bank

LABOUR'S PLAN FOR A STRATEGIC INVESTMENT BANKLABOUR’S PLAN FOR A STRATEGIC INVESTMENT BANK 2 Table of Contents Executive Summary................................................................................................................3 Overview................................................................................................................................................3 Operation ..............................................................................................................................................3 Introduction................................................................................................................................5 An investment economy.................................................................................................................5 The Long-term Case for a Strategic Investment Bank ............................................6 Funding small, medium and innovative, high-growth companies...............................6 Financing capital investment.......................................................................................................7 Capitalisation operation and governance of Labour’s Strategic Investment Bank ........................................................................................................................................... 10 3 Executive Summary Overview Growing Ireland’s economy is a core priority for Labour. Expanding the flow of investment capital to grow employment and increase living standards is a key element of Labour’s economic strategy. The Irish Banking system neither offered the necessary levels nor required range of investment finance to Irish businesses – even during the boom. This gap has, with the banking crisis, become a chasm. In order to

meet this critical requirement Labour is proposing the establishment of a Strategic Investment Bank in two phases: Phase One. During its initial phase Labour’s Strategic Investment Bank will act as an investment vehicle to channel funds (approximately €2.8 billion) from the National Pension Reserve Fund. It will focus on projects that will enhance infrastructure, boost growth and generate employment in the Irish economy. It will be fully independent and will follow international best practice commercial investment norms. Phase Two. As market conditions improve Labour’s Strategic Investment Bank will develop into a functioning bank, taking deposits and raising long term financing. €2 billion of the funds remaining in the National Pension Reserve Fund will be allocated as capital for Labour’s Strategic Investment Bank. Operation Labour believes that the Strategic Investment Bank should be an essential component of Ireland’s re-structured banking system. It draws on the German KfW Bankengruppe; the Japanese long-term credit banking system; the European Investment Bank (EIB); and European Investment Fund (EIF). 4 Labour’s Strategic Investment Bank would operate on a strict arms-length basis from Government. Irish citizens and the Irish Diaspora would be encouraged to make deposits in the bank, and to purchase Citizen Bonds with differing maturities as a way of investing in the recovery of the Irish economy. Labour’s Strategic Investment Bank would also seek consumer deposits and access wholesale capital markets when conditions allow. Labour’s Strategic Investment Bank would be a key lender to small and medium sized businesses as well as innovative firms. It would also work closely with the Enterprise Agencies to facilitate high-potential firms. Labour’s Strategic Investment Bank could, following a detailed appraisal, invest in such companies seeking funds of between €2 million and €10 million. Its investment decisions would however remain the exclusive preserve of the bank. Labour’s Strategic Investment Bank would also support investment in large infrastructure and infrastructure-related projects. Labour’s Strategic Investment Bank will not be a high-street or ‘retail’ bank. It will have a small number of regional offices and an on-line presence. By establishing a Strategic Investment Bank, Labour will create a wealth- generating productive legacy that will play a key role in Ireland’s long-term prosperity. 5 Introduction An investment economy The core objective of Labour’s economic policy is to replace Fianna Fáil’s hit and miss approach with a strategic drive towards a sustainable investment economy, where innovation is promoted across all sectors, where there is an...

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