AIB and Bank of Ireland 'on target' to meet lending commitments on SMEs

LENDING TO small firms in Ireland continues to show improvement, a new report from the Credit Review Office (CRO) has found.

In its third quarterly report, the agency said the two banks covered under the Government’s recapitalisation plan – Allied Irish Banks and Bank of Ireland – had met commitments made in lending plans they submitted to both the Department of Finance and the review office last May.

The banks are on schedule to meet the target of €3 billion in new lending each by April laid down by Minister for Finance Brian Lenihan.

The banks also committed to implementing training programmes for frontline lenders and support staff, and business development roadshows aimed at small- and medium-enterprise (SME) customers.

In total, the two banks havecompleted 170 internal reviews of decisions on loan applications. Of these, 131 decisions were upheld, 27 were reversed and 12 are still being reviewed.

“The mantra that ‘banks aren’t lending’ is a widely quoted piece of conventional wisdom used in the media without challenge or clarification, or any empiric evidence,” the head of the agency John Trethowan said in his report.

“Whilst there were undoubtedly major credit supply problems in the market in 2008-09, the conventional wisdom has failed to recognise the progress made since then – at least in the two main banks which I monitor.

“The situation may or may not prevail elsewhere in those banks which have not been subject to the Credit Review Office influence.”

He also noted that banks reported “subdued” demand for new lending from SMEs.

Mr Trethowan said he had sought further clarification from the banks on the amount of “new” money being lent.

Mr Lenihan welcomed the report, saying it showed “encouraging signs”.

“The Government, through the CRO, is sustaining pressure on our banks to deliver on the strong commitments given in their plans to support viable SMEs in all sectors of the economy and in every corner of the country,” he said.

The agency has overturned decisions relating to €978,300 to date, and the banks have provided the credit.

In the report, Mr Trethowan noted that, to date, none of the non-Nama banks had volunteered to join the review office process.

“This is very disappointing, and to address this I will write to the Financial Regulator with suggestions to simplify and strengthen the code of practice for SME lending for all banks,” he said.

Chambers Ireland said it was impossible to have a true picture of the situation until all banks, including foreign-owned institutions based in Ireland, take part in the process.

AIB and Bank of Ireland make up about two-thirds of the market.

Welcoming the report, AIB described SMEs as a “critical” sector, adding it was “determined to continue to support viable SMEs and we encourage early and regular engagement between SMEs and ourselves”.

However, the Irish Small and Medium Enterprises Association (Isme) said the review office was not working. The association said the office had dealt with only a small number of cases.

“Small business has shown its ‘faith and trust’ in the process by ignoring it,” Isme chief executive Mark Fielding said.