New bank credit report shows lending to small firms is improving

18 November, 2010

Lending to small firms by the country’s two main banks is improving, according to the second quarterly report from the Credit Review Office (CRO) published today [Thursday] by the Government.

The credit reviewer has analysed 19 applications for loans to small firms and told the country’s two main banks that credit should have been given in five of them.

John Trethowan agreed with the bank in 12 of the 19 applications reviewed since the CRO was set up at the start of April, sided with the borrower in five cases and considered that more work was required of the borrower and the bank in two others.

The report shows that the two banks covered under the Government’s recapitalisation plan, Allied Irish Banks and Bank of Ireland, have processed 114 internal reviews of decisions on loan applications.

Of those, 86 were upheld, 20 were reversed and eight are still being reviewed.

The CRO independently adjudicates on appeals from small and medium-sized enterprises (SMEs) which were refused loans by the two banks and offers an opinion on whether the decisions were justified.

The Minister for Finance, Brian Lenihan TD, and the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, said the CRO’s second quarterly report showed encouraging signs of progress on credit lending for small businesses.

Minister Lenihan said it is vital that the banking system supports economic activity and that the banks actively support the SME sector.

‘Mr Trethowan has found that the lending situation is now continually improving.

‘I am very pleased with the efforts of Mr Trethowan in promoting the availability of his review service and I welcome the findings that all of the review cases to date have been difficult lending decisions and that there is no evidence of the banks indiscriminately refusing credit,’ said Minister Lenihan.

The Government acknowledged that the number of completed reviews was small but it welcomed the full cooperation of the banks with the recommendations of the CRO when they went against the original decisions on loan applications.

Minister O’Keeffe said securing steady credit flow to SMEs was a ‘prerequisite for job creation and economic recovery’.

‘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.

‘Small businesses are the bedrock of the indigenous Irish economy and, although many challenges remain in credit lending for small businesses, we are making progress and jobs are being protected.

‘The Government will continue to monitor very closely the banks’ progress under their lending plans and press for more credit for viable SMEs which employ some 700,000 workers across the country,’ said Minister O’Keeffe.

Mr Trethowan said the recapitalisation plan for the two main banks is now achieving its objective of ensuring that a functioning banking system is in place to support economic activity.

‘Current market perceptions that banks are not lending to SMEs is based on experiences from six to nine months ago and the current situation, while still not entirely perfect, is now continually improving,’ said Mr Trethowan.

This is Mr Trethowan’s second quarterly report on the CRO’s role in ensuring that Allied Irish Banks and Bank of Ireland achieve the objectives set for each of them to make available €3 billion in new lending each year over the next two years.

The CRO website, creditreview.ie, has been visited 5,589 times.

The helpline, 1850 211 789, has taken 467 calls from borrowers.

The second quarterly report covers the period from July to date.

Mr Trethowan was appointed credit reviewer at the end of March.

ENDS

Note: The CRO’s second quarterly report is available on www.finance.gov.ie

Bernard Mallee, Press Adviser to Minister Batt O'Keeffe, Department of Enterprise, Trade and Innovation, on Tel: +353 1 631 3944, Mobile: +353 87 9173022, Email: bernard.mallee@deti.ie