Irish SMEs charged highest interest in Eurozone survey
Published 10/07/2015 | 02:30
Irish small and medium sized enterprised (SMEs) are paying the highest interest for new loans of business in any of 15 euro members surveyed, according to new research from the Central Bank.
Business borrowers here are being charged an average of 5.5pc a year in interest in new loans of up to €250,000, compared to an average across the Eurozone of 3.6pc.
The figures are included in an SME Market Report published by the Central Bank yesterday.
They are the latest stark illustration that the cost of credit here is out of line with European norms, and come on the back of the still rumbling controversy over the high cost of standard variable rate mortgages here, which are double the European norm.
The research also found that more business borrowers here have seen interest rates rise than benefited from a decrease, in the six months to the end of June.
That was in contrast to experience elsewhere in the euro area, where borrow- ing costs are falling.
Interest charges here are significantly higher for smaller debts - by around three percentage points, way above the rest of Europe, the report said.
One reason credit costs more in Ireland is the huge cost to lenders of defaulted and distressed loans which remain on their books seven years after the start of the financial crash.
More than one-in-five business loans here is in default, and in terms of value almost 40pc of SME debt held by the banks is distressed, the report shows
In a positive sign of the economy the report says demand for credit appears to have stabilised, with a modest increase in loan applications in the period. The overall stock of SME debt declined, however, as boom era borrowings continue to work through the system through repayments or write-offs.
Overall, loan applications and borrowing for investment remain subdued here, though borrowing for working capital is high. Rejection rates for loans are above euro area averages.