BANKS are not making loans to many viable companies because the lenders are incapable of judging the level of risk, the Credit Review Office complains in a report issued today.
Credit Review Office boss John Trethowan said banks are making loans to farms and low- and medium-risk companies but are not showing much appetite for lending to "more challenging but still viable businesses".
Mr Trethowan, who is responsible for looking at loans which have been refused by the banks, said lending to challenged businesses will be essential to support the recovery in the domestic economy.
While criticising the banks, however, he welcomed a new course for bank officials on lending to small companies provided by the Institute of Bankers in Ireland.
Mr Trethowan said that businesses and professional groups find banks to be "remote and somewhat binary" in their approach – they tend to only offer positive or negative responses to the companies' credit requests rather than trying to find workable lending solutions.
More than half of all refusals examined by the Credit Review Office are overturned, he said. That rate has been fairly consistent since the office was opened two years ago.
Lending of more than €8bn was sanctioned in 2012, he added. Around €2.5bn was new lending while the rest involved loans being rolled over.
The largest number of loans are issued in October and November as companies stock up for Christmas and buy cars for the January rush. Farmers also borrow in these months in order to fatten livestock over the winter.