Accounting body offers to broker SME debt solution

The leading representative body for the accountancy profession in Ireland has said it is willing to partner with the Irish Banking Federation in a bid to develop a series of solutions aimed at alleviating debt levels in the small business community.

Recent Central Bank forecasts suggested that up to €25bn worth of SME- related debt is currently impaired; with those levels creating a knock-on concern for job creation and business growth.

“One of the most significant issues affecting SMEs in Ireland, at the moment, is the level of unsustainable debt that is impacting otherwise profitable operations.

“Ironically, unless these businesses are allowed to grow, their capacity for servicing the debt is diminishing all the time,” according to Joe Aherne, president of the Institute of Certified Public Accountants in Ireland (CPA Ireland).

Mr Aherne said the Government must not ignore warnings from the Central Bank and the troika regarding the failure of banks to tackle the SME debt crisis; and said the CPA is willing to collaborate with the IBF to find a solution.

“CPA Ireland members are at the coalface, working with SMEs throughout the country and are well-positioned to partner with the Irish Banking Federation to help develop a template of workable solutions, which can be implemented by local banks without the need to refer each and every case to head office for approval,” he said.

“Putting in place workable arrangements can offer the banks the prospect of recovering a greater proportion of their money in the longer-term.

“In some cases, a significant portion of the debt, or even all of it, should be warehoused, with capital and interest payments ceasing for a certain number of years and interest payments ‘forgiven’ for the warehousing period.”

Mr Aherne said that now is the time for real and meaningful action, by the banking sector as a whole to address the issue — adding that if the banks don’t deal with the situation, the Government must force their hand.

“We’ve seen the consequences of the ‘head in the sand’ approach which banks took in relation to mortgage debt and we cannot repeat the mistakes of the past when it comes to SME debt.

“The banks claim to be partners in the recovery, so they must now prove that by turning their skills and expertise to this as a matter of urgency,” he said.

Speaking yesterday, IBF director of public affairs Felix O’Regan said that the federation is already working with its member banks on the SME debt overhang issue, but it is also open to working in partnership with various bodies “where meaningful collaboration can give rise to progress and solutions”.