It was well-known that SMEs in Ireland struggle to access bank credit.
Patrick Honohan, the former governor of the Central Bank, had addressed such concerns before stepping down last year.
However, Central Bank research published yesterday show that Irish SMEs last year paid an average interest rate of 5.8% — the highest by far in the eurozone.
Banks in Cyprus — which also collapsed during the crisis — had the second costliest SME loans but still charge significantly lower rates of around 5%.
Austria, with an interest rate of 2.2%, charges its SMEs the least, while French SMEs are charged just a little above that rock-bottom rate.
“Such large differentials are a potential source of concern for policymakers, in that high SME rates in some countries may reduce credit demand and increase debt service burdens for firms, with knock-on effects for investment, profitability and growth,” said researchers James Carroll and Fergal McCann.
“Further, in the case of euro area countries, significant differences in the cost of borrowing for similar firms suggest the possibility of a breakdown in the smooth transmission of monetary policy to the real economy.”
The researchers identified the risk of future defaults, the size of the macroeconomic shock, the “stressed” nature of the banking industry, as well as “weaker bank competition”, as factors explaining the big difference in SME loan rates across the eurozone.
“These findings can act to provide clarity to current debates around the high cost of borrowing in markets such as Ireland, as well as the heterogeneous reaction of SME rates to monetary easing across the euro area,” the researchers said.
Other research by the Central Bank showed a big range in the costs of loans accessed by different types of SMEs.
Meanwhile, younger SMEs invest more, but regions of relatively low economic recovery — as measured by unemployment — also determine how much they invest.