Shortage of equity hurts SMEs
Published 11/11/2015 | 02:30
Bankers have learned their lesson from the crash and are remorseful, the head of the agency tasked with monitoring lending to small and medium sized businesses has said.
John Trethowan, pictured, the head of the Credit Review Office, told TDs and senators that banks have returned to being "prudent cash flow lenders", although demand is low.
And he suggested there was little concern at this point that reckless lending could make a comeback.
"I don't think we're going to go from boom to bust," he told the Oireachtas Committee on Jobs, Enterprise and Innovation. "Lessons have been learned and bankers are contrite at this point in time," he said.
"Until such time as someone encourages them to increase their return in equity, or increase their dividends, I can't seen things moving forward."
Mr Trethowan said the Central Bank has "hawk eyes" on lending as well. "Some of the things that we do and suggest to the banks would probably lean against the far edge of what their risk tolerance would be for lending," he added. Mr Trethowan said the biggest challenge for SMEs was lack of capital. "Lack of capital, or equity remains the biggest challenge to the SME sector in Ireland," he said.
His comments come just a day after a report published by the Department of Finance concluded that fewer than a third of small and medium sized businesses are looking for credit, with the vast majority focused on stabilising their business rather than pursuing growth opportunities.
More than eight in ten SMEs have reported improved or stable turnover since April, according to the latest SME credit demand survey from Red C, published by the Department of Finance.