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Banks 'have forgotten basic skills' through years of property lending

IRISH banks have been spoilt by years of property lending and have forgotten how to lend to exporters and other companies that don't buy assets, a leading banker admitted yesterday.

The country's banking industry doesn't have the skills to serve some corporate customers and needs to pay particular attention to export-oriented customers, Irish Bankers Federation president Robert Gallagher said yesterday at the federation's annual conference.

Irish bankers have forgotten how to lend to exporters, life science companies and other businesses that don't have assets.

The bankers lack knowledge about trade finance and cash flow lending, which is essential when assessing loan applications from such companies, the head of Ulster Bank's Capital Markets added.

With Irish building contractors building roads in the Shetland Islands and hospitals in Dubai, Mr Gallagher said Irish banks must change lending habits to builders and developers. But while urging bankers to brush up their skills, Mr Gallagher dismissed blanket calls for more lending to business.

"Lending to all businesses is not good banking," Mr Gallagher said. "Poor business plans should not get bank capital."

John Fitzgerald of the Economic and Social Research Institute echoed some of Mr Gallagher's concerns about banks' lack of expertise, adding that Irish exporters were the key to the country's economic recovery. That recovery will come faster than many are predicting, but it could be the middle of the decade before we see a return to full employment, the ESRI economist added.

Frank Ryan of Enterprise Ireland agreed that banks didn't understand the needs of the exporting sector. Many emerging companies' core assets are in people and intellectual property rather than the tangible assets that banks have traditionally sought.

No bank had joined Enterprise Ireland's trade missions abroad in the past 10 years, he noted. Banks dealing with export-oriented companies should include Enterprise Ireland in discussions when borrowers ask, Mr Ryan said.

Irmfired Schwimann of the EU's competition authority, who was also addressing the conference said across Europe almost all countries had been forced to support banks.

She said her department was currently working on cases involving the impact of state aid on 40 banks across Europe. The banks are being supported by 20 separate state schemes.

Irish Independent