Lending to small firms by the two main banks in Ireland is improving, the Credit Review Office (CRO) said today.
Publishing its second quarterly report, the CRO, which hears appeals from small and medium-sized enterprises refused loans by Bank of Ireland AIB, said the situation was continually improving.
It reviewed 19 applications since it was set up in April, and sided with the banks in 12 of those cases. It found credit should have been given in five of the applications.
In its first report published in July, the Credit Review Office (CRO) had completed six reviews since opening. Yesterday, it said it had reviewed just 19 applications to the end of September.
The former banker who heads up the CRO, John Trethowan, said the recapitalisation plan for the two main banks is achieving its objective of ensuring that the country has a functioning banking system in place.
Mr Trethowan said “the mantra that the banks aren’t lending was probably correct six months ago but things have moved on.”
Figures in the report show that the two banks have processed 114 internal reviews of their decisions on loan applications with Bank of Ireland upholding 60 of its refusals and overturning five while AIB upheld 26 of its own refusals and overturned 15.
Mr Trethowan said that while his role was to ensure that the two banks covered under the government’s recapitalisation plan, AIB and Bank of Ireland, achieve the target of €3 billion in new lending each year over the next two years, the issue, which had been with the supply of credit, is now with demand.
He said that overall, loan applications are said to be down by up to 60 per cent with the banks, “reporting a lack of demand at this time.”
Minister for Finance Brian Lenihan welcome the report’s findings that there is no evidence of the banks indiscriminately refusing credit.
However, the number of finished reviews was small, a fact acknowledged by the Government.
Asked about the possible impact of events this week on lending to SMEs, the Minister for Enterprise Trade and Innovation, Batt O’Keeffe said, “there is nothing happening in the bigger picture that will impact the front end, funding to SMEs will not be jeopardised.”
The Minister added, "The recapitalisation strategy is achieving its objective of a functioning banking system."
Commenting on the findings, Isme chief executive, Mark Fielding said, "there is absolutely no doubt that the low level of uptake by SMEs of the services of the CRO is due to companies being fearful of using the process and it is viewed as yet another layer of bureaucracy."
Mr Fielding said that while awareness of the appeals process had increased, a recent Isme survey showed that "58 per cent of companies still did not know that the service exists."