Monday 20 November 2017

Watchdog pushes review on lending to cash-starved small businesses

Finance Minister Brian Lenihan and Enterprise Minister Batt O'Keeffe are to meet with AIB bosses today to discuss the bank's SME lending policies. Photo: Tom Burke
Finance Minister Brian Lenihan and Enterprise Minister Batt O'Keeffe are to meet with AIB bosses today to discuss the bank's SME lending policies. Photo: Tom Burke
Laura Noonan

Laura Noonan

THE Financial Regulator has brought forward its landmark review of small to medium-sized enterprise (SME) lending in response to growing concerns about the economic impact of paralysed credit streams.

The regulator was originally set to publish a comprehensive review of banks' SME lending strategies in January, complete with recommendations on how they could improve their activities.

A spokeswoman for the watchdog confirmed over the weekend that the review had been brought forward by two months "given the increasing focus on the need to lend to this sector of the economy".

Last week, John Fitzgerald, an economist with the Economic and Social Research Institute, warned that the Gover- nment would have to force banks to lend or Ireland would face a "decade of misery".

Finance Minister Brian Lenihan and Enterprise Minister Batt O'Keeffe are to meet with AIB bosses today to discuss the bank's SME lending policies.

The regulator's recently unveiled banking strategy paper promised detailed reviews of the banks' main commercial activities, kicking off with a review into mortgage lending, which was published last week.

A spokeswoman for the regulator confirmed that SME lending was the "logical" choice for the next review, since SME lending and mortgages are "key portfolios" for Ireland's banks.

Appropriate

"We now propose to complete this review [SME lending] on November 30, two months earlier than originally planned," she said, adding that bringing it forward was an "appropriate step given the increasing focus on the need to lend to this sector of the economy".

The regulator's stated objective for the business lending review is "to ensure that banks are making adequate changes to support the growth in SME lending, and that controls for such lending are appropriate".

Last week's paper on mortgage lending featured a number of recommendations for improved practices, including more sophisticated risk analysis and enhanced board-level engagement. The SME document is also expected to include detailed recommendations on how banks can improve their practices.

Mark Fielding, head of business lobby group ISME, last night welcomed the regulator's decision, but stressed that the quality of the information gleaned would be key.

"Until recently, official figures weren't able to distinguish between normal SME lending and lending to construction and agriculture," he said.

"These figures need to make that distinction, and to distinguish between new loans and overdrafts being rolled into loans, between new and old customers, and between different business sectors," he added.

If accurate figures can be compiled, Mr Fielding said they would debunk banks' claims that most SME loans are being approved, potentially encouraging a change in attitude.

Irish Independent

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