No disclosure on SME debt restructuring

The Central Bank says it will not disclose how much SME debt has been restructured by the pillar banks.

In reply to a letter by Fianna Fáil finance spokesman Michael McGrath, Cyril Roux, the deputy governor of the Central Band, said the focus was on securing long-term forbearance arrangements for customers in arrears. The two pillar banks are currently meeting their quarterly targets, he added.

“While the Central Bank’s focus on addressing the issue of SME debt is welcome, the process would be greatly enhanced if — as in the case of mortgagearrears cases — the SME debtrestructuring targets were published and the performance of the banks was subject to public scrutiny,” said Mr McGrath.

“On an issue of this public importance, it is not acceptable that the Central Bank will not confirm the amount of SME debt that has been restructured so far.”

Morgan Kelly, a lecturer in economics at UCD, last month said the banks had failed to deal adequately with SME debt. He claimed there was €58bn of debt, including €33bn property debt.

When the ECB conducts its stress tests this year, the banks would then have to move on businesses in order to preserve capital. This would presage a wave of SME failures and put the economy back in crisis mode.

According to figures released by the Central Bank, there was €55.9bn of SME debt at the end of December. But €29.84bn of this related to property companies that were classified as SMEs and €24.51bn belonged to SMEs exposed to the real economy.

Mr Roux said solutions being offered to the banks included agreed asset sales, term extensions on loans, part capital and interest payments, interest only, examinership, and receivership.

Mr McGrath said: “This is a broad range of outcomes with significantly differing impacts on the SME and its employees. In the case of residential mortgage arrears, there is now a quarterly update as to the success level of each differing restructuring. I believe this should be done also in the case of SME debt.

“Currently, targets are only in place for restructuring SME debt in respect of the pillar banks. While they are the main players in the SME space, there are other significant lenders who I believe should also be subject to a programme of published targets along the lines of the mortgage arrears resolution targets.

“This will help to ensure a comprehensive approach, particularly in cases where a firm has debts across a number of banks,” he added.