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Banks trailing EU counterparts with SME lending

SMALL and medium-sized companies in Ireland are having a tougher time getting credit than those in most other European countries, the head of the Central Bank has said.

Governor Patrick Honohan said the Dame Street bank remains concerned about the access to finance for SMEs with survey evidence suggesting difficulties still exist.

At the launch of the Central Bank's 2012 annual report, Mr Honohan said that while a lot of the rejections by banks were correct decision, there remains en element of conservatism in credit decisions.

"We remain concerned about the access of SMEs to finance," Mr Honohan said.

"There has been less talk about it recently but the survey evidence that we've been looking at does still suggest that Irish SMEs are having a tougher time getting credit than in most other European countries. That is still the case even though you don't hear so much about it."

The comments come after the Economic and Social Research Institute (ESRI) claimed the lack of credit is having little effect on the small business sector.

The ESRI research appears to fly in the face of claims from small and medium enterprises (SME) and their representatives that the unwillingness or inability of banks to lend is crippling the sector. The study found that as little as 4pc of the sector is being hurt by not being able to get credit, with the research stating that most SMEs do not apply for funding because they don't need it.

The Central Bank report also shows that Mr Honohan was entitled to €276,324 in salary and fees last year, but gifted €63,324 back to the state. Financial Regulator Matthew Elderfield, who is leaving the Dame Street bank later in the year to take up a job with Lloyds, earned €340,000.

Key points from the annual report include:

• The Central Bank made a record profit last year of €1.4bn, with €1.1bn provided to the exchequer.

• The bank investigated 188 advertising issues last year – up from 90 in 2011. Sixty of these were withdrawn and 86 had to be changed.

• Lending restrictions are now imposed on about 57pc of credit unions on the basis of deterioration in their financial positions.

• 76 market abuse investigations were launched last year.

• 16 fines were handed down through enforcement actions totalling €8.5m. Fines ranged from €800 to €3.2m.

• Warning notices about alleged unauthorised activity were published for 34 firms, with 84 reports made to the gardai. Some 15 firms were also inspected.

Irish Independent