Ireland is setting up a new state bank to pump hundreds of millions of euro into struggling small businesses. The Strategic Banking Corporation of Ireland (SBCI) will be funded by Germany and the EU as well as Irish pensions after a deal was struck with German chancellor Angela Merkel. The government has vowed that SBCI will lend more than half a billion euro to small and medium-sized firms which are being frozen out by the banks. The new state bank is expected to be lending to businesses before the end of the year. The plan promises innovative loans which will be channelled from the SBCI through so-called on-lenders, which are usually existing high street lenders who will assess loan applications and administer the funding. The loans will be low-interest and targeted at firms who cannot get credit through the normal channels.