THE GOVERNMENT is calling in senior management of the major banks as part of a “get tough” strategy to encourage them to release more credit to small and medium-sized enterprises (SMEs).
Minister for Finance Brian Lenihan and Minister for Enterprise Batt O’Keeffe are expected to meet executives from Bank of Ireland, AIB and Anglo Irish Bank next week. The Ministers will be accompanied by the credit reviewer John Trethowan.
Mr O’Keeffe confirmed to The Irish Times that he is deeply unhappy with the lack of effort being made by one of the major banks in providing credit to SMEs. He would not be drawn on the identity of the bank but it is believed to be AIB.
“One bank is making a particular effort but another bank – which has a plan for lending – does not appear to be making any effort, good, bad or indifferent.
“They are using all sorts of mechanisms to frustrate people who are looking for funding.”
Mr O’Keeffe brought a series of reports he commissioned on the levels of credit being extended to SMEs. He said the banks were maintaining that their approval rate for lending was 80 per cent while businesses were reporting 20 per cent. Mr O’Keeffe said that having toured the State with a Government enterprise roadshow, he tended to believe the banks were not lending.
“I brought my reports to Cabinet this week to outline clearly that the SME sector was an absolute priority in terms of sustaining and creating jobs,” he said.
“The supply of credit was the only lifeline they had. As a government, now that we have recapitalised the banks, there’s an onus to make sure the banks comply.”
Mr O’Keeffe said loyal bank customers had been treated “abominably”.
“Credit is not being made available to them. Banks are making life an absolute hell for some people. As Government we have no choice but to make sure it’s successful. Therefore we can’t accept what we are being told.”
The Minister said he would use the reports, as well as the recent report of Mr Trethowan, as the basis for his argument in telling banks they must do better.
He said he was keen that all loan applications were received in writing by the banks rather than orally, so that a full picture could emerge.
The Government has been the subject of consistent criticism from the Opposition, organisations representing SMEs, and indeed from Fianna Fáil backbenchers in relation to this issue.
Fine Gael, Labour and Sinn Féin have said the Government had concentrated all its efforts in bailing out the banks while ignoring the plight of smaller enterprises.