Sunday 23 November 2014

Central Bank 'meets targets' but won't reveal them

Published 02/04/2014 | 02:30

Repro Free. 10/10/2013: Central Bank of Ireland staff photography. Picture Jason Clarke Photography.
Cyril Roux
Cyril Roux

THE CENTRAL Bank has boasted that retail banks are meeting lending targets to businesses, but won't say what those targets are. The regulator refused yesterday to release details about the progress of the country's biggest lenders in handling distressed small business loans.

Following requests from both Fianna Fail finance spokesperson Michael McGrath and the Irish Independent, Deputy Governor of the Central Bank Cyril Roux (below) said both Bank of Ireland and AIB had complied with targets regarding the restructuring of small business loans in arrears but refused to disclose what these targets are or how they have been reached.

Mr Roux cited commercial reasons for refusing to give details. In a letter to Mr McGrath, Mr Roux would only say that the targets involved moving borrowers "from short- term forbearance measures to longer-term solutions". These solutions can include assets sales or pushing companies into receivership and examinership, as well as loan extensions and interest-only periods.

Some €25bn worth of small business loans, or half of all those in the State, were non-performing as of last year, according to outgoing Central Bank head of credit institutions Fiona Muldoon.

The unwillingness to make SME loan restructuring figures public contrasts with the regulator's approach to distressed mortgage resolution figures, which are regularly released.

"There hasn't been any explanation as to why the Central Bank is taking a different approach to SME debt," said Mr McGrath. "This is an issue that deserves transparency.

"While I have queried aspects of the Mortgage Arrears Resolution Targets programme, I acknowledge it does provide an important source of public scrutiny in respect of how the banks are performing in the area of mortgage arrears. It is widely agreed that there is a significant societal issue at stake in dealing with mortgage arrears. However, given the importance of SMEs to local communities, I believe there is an equally important issue to be addressed in relation to how SME debts are tackled."

Bank of Ireland has been set higher targets than still-unprofitable AIB, it is understood. No targets have been set for the country's other retail lenders, including nationalised Permanent TSB.

Banks' handling of distressed SME loans has reignited public debate in recent months, after UCD economist Morgan Kelly caused a media firestorm by claiming these debts pose a major risk to the country's nascent economic recovery.

ECB stress tests, Mr Kelly said, will force banks to clamp down on this debt within the year, causing a damaging ripple effect on consumer spending.

Irish Independent

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