Monday 26 January 2015

BOI react to Morgan Kelly's SME prediction: 'There is no time bomb'

Published 10/03/2014 | 12:57

COUNTING THE COST: UCD economist Morgan Kelly has estimated that the overall cost of
debt-forgiveness could be €6bn. Photo: Gerry Mooney
Morgan Kelly tells students that if there was a quick ‘clean-up’ of Irish banks, Ireland could be facing something ‘very, very horrible quite soon’. Photo: Gerry Mooney

There is no "time bomb" in the banks, the head of small business lending at Bank of Ireland has insisted.

And his opposite number at AIB said the bank will have tackled the majority of its problem business loans by the end of the year.

The comments follow a prediction by economist Morgan Kelly that a European probe of all the main banks later this year could have a devastating impact on small businesses because it will uncover masses of soured loans.

The UCD economist is highly regarded after predicting the scale of the mortgage crisis and Anglo Irish Bank's disastrous losses.

Small and medium enterprises (SME) owe about €50bn in total all, split between €30bn of property loans and €21bn of so called "core debt" such as overdrafts.

But the two main banks today insisted they are on top of the problem of businesses weighed down by property debt.

"There is no time bomb," Bank of Ireland's head of lending to small business Gerry Prizeman said today.

The upcoming bank stress tests are about assessing whether lenders have adequately 'provided' for loans - meaning set aside cash to cope with losses - not about looking at individual cases, he said.

AIB's John Irwin said his bank knows the scale of the issue and has been working with business customers to come up with "pragmatic solutions" to keep businesses going.

Banks need their business customers if the lenders are to generate profits, he said.

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