Business Irish

Saturday 18 November 2017

Banks need to take more risks when lending to businesses – review

John Trethowan. Photo: Damien Eagers
John Trethowan. Photo: Damien Eagers

Independent.ie reporters

BANKS are lending to established businesses and farms but there is little evidence of support for "enterprise risk taking", according to a new report from the Credit Review Office.

The office provides an independent view on the refusal of credit to SMEs and farms.

Credit reviewer John Trethowan said the two pillar banks – Allied Irish Banks and Bank of Ireland – need to reassess their appetite for risk in order to support growth in the economy.

His office has received 44 applications from SMEs who have been refused credit by the two banks.

''Whilst I acknowledge that this is a difficult lending environment for lenders, my views are influenced by where we are in the economic cycle, where both trade levels and commercial property values may have now stabilised around their current levels,'' Mr Trethowan said.

''If this is the case, it should make appraisal of future prospects much easier for lenders to assess risk than anytime since 2008,'' he added.

He also pointed out that the bank solvency crisis was mainly caused by commercial and residential property lending and only to a less degree in lending to SMEs.

Mr Trethowan said work ongoing on 31 cases.

Of the cases completed in the last quarter, 17 banks refusals were overturned.

This resulted in the two banks supplying €2m of credit, which the Credit Review Officer said supported a further 140 jobs in the SME sector.

Mr Trethowan said that since the setting of the office in 2010, 197 appeals have been received. Of the cases completed, 69 of the refusals were overturned. This resulted in banks supplying €6.9m of credit and supporting 683 jobs in the SME sector. 48 of the cases were upheld in the banks' favour.

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