Some €875 million – or 7.3 per cent – of all performing loans to small and medium businesses have a "high vulnerability" suggesting their ability to repay in the event of a downturn would be threatened, according to Central Bank research.
The research, conducted across three banks in the Republic (AIB, Bank of Ireland and Ulster), found that there is more than €12 billion in outstanding loans to SMEs.
In his financial stability note for the Central Bank, Niall McGeever calculated a vulnerability score for each exposure by linking borrower characteristics and macroeconomic conditions to historical default outcomes.
High vulnerability
Of the €875 million outstanding deemed to be highly vulnerable, almost a quarter relates to Dublin borrowers. Some €155 million relates to borrowers in the southwest while the mid-east and west account for €103 million each.
In sectoral terms, accommodation and food alongside wholesale and retail account for just over half of high vulnerability balances. Agriculture, forestry and fishing accounts for €145 million while manufacturing accounts for €57 million.
In the majority of cases, high vulnerability exposures relate to term loans and overdraft facilities which account for 96.2 per cent of the total. Hire purchase and leasing agreements account for just €13 million, or 1.5 per cent of all high vulnerability balances.
Some 55 per cent of loans originated between 2015 and 2018 while just over 50 per cent are due to mature between this year and 2021.
