IRISH SMALL and medium-sized businesses are being charged more than the euro zone average for new loans, according to data from the Central Bank.
The data was presented to the Oireachtas Joint Committee on Finance yesterday in a presentation by the Central Bank and the Central Statistics Office.
The figures show that, in terms of new business lending, Irish SMEs are borrowing money from banks at interest rates more than one percentage point higher than some of their euro zone counterparts, although retail interest rates on outstanding amounts are more closely aligned.
Retail interest rates on new loans to non-financial corporations for amounts up to €1 million stood at around 5.25 per cent in Ireland late last year, compared to a euro zone average of 4.25 per cent. The gap was slightly lower on new loans over €1 million.
While declining to comment on the reasons behind the rate difference, the Central Bank’s head of statistics Martin O’Brien said the higher interest rates on new business lending to SMEs could reflect higher funding costs or the underperformance of the underlying loan books. Structural issues such as the relatively small number of banks operating in Ireland compared to some other European countries could also be a factor.
Some €87.7 billion was on loan to Irish non-financial corporations by banks operating in Ireland at the end of January, down from a peak of €171.3 billion in August 2008.
