BOSI to close down business accounts as full exit looms
Bank also plans to stop lending immediately but promises to treat customers honourably
BANK of Scotland (Ireland) has called an immediate halt to new working capital facilities for any of its business customers as the institution prepares for a complete exit of the Irish market.
Six months after bringing down the axe on its Halifax retail network, Bank of Scotland (Ireland) (BOSI) yesterday confirmed it would hand back its banking licence to the Financial Regulator at the end of the year.
The move chiefly affects BOSI's 12,000 business customers, since Halifax is already in wind-down and customers have already had to close their current accounts.
BOSI has up to 5,000 business current accounts -- these will all have to be closed by the end of the year.
BOSI will also stop new lending immediately, so businesses will be unable to access new working capital facilities or overdrafts.
Businesses that already have overdrafts or working capital facilities will have to wind those down by the end of the year. Term loans will continue as normal, with businesses switching their repayments to a new company that will run-down BOSI's book.
"This raises serious concerns," said Mark Fielding, head of small business lobby group ISME. "A lot of these businesses will struggle to get normal banking arrangements."
Business sources pointed out that companies had little chance of securing finance facilities with new banks since they'd have "no track record".
Others pointed to the particular difficulties facing business customers in arrears who might find it hard to strike up a new relationship with any bank.
"The Government will have to do something innovative here," Mr Fielding said.
"We'll be asking them to ensure that the two state supported banks (AIB and Bank of Ireland) will take on businesses that can't get banking arrangements."
BOSI chief executive Joe Higgins last night stressed that his bank was committed to treating its business customers "honourably".
"If businesses have facilities expiring we'll extend them until the end of 2012, that will give time for the market to improve," he said.
"If they can't refinance their business current accounts, we'll convert it to a term loan".
BOSI's withdrawal from the Irish SME market comes just six months after Mr Higgins insisted that his bank remained "very committed" to its 12,00 business customers.
Against that backdrop, business sources last night expressed scepticism about BOSI's latest promises to stand by Irish SMEs.
"Our statements in February were a matter of strategic intent," Mr Higgins said.
"Then there was a strategic review from our shareholders. Our customer statements are completely different."
He insisted that BOSI's customers could "trust us" on the commitments made yesterday, adding that the Financial Regulator had also been given commitments on how BOSI's business book will be wound down. "We regret the impact of this on our customers and we are working to minimise that impact," he added.
Mr Higgins declined to say how much of BOSI's business book was in arrears but said a "reasonably high percentage" of it was "challenged".
Asked if they would take on business customers already in arrears, both AIB and Ulster Bank said they were committed to supporting SMEs but declined to answer the specific query. Bank of Ireland said being in arrears wasn't an automatic disqualification against opening a new account.