Business groups welcome banking plans

Business groups today welcomed the measures outlined by Finance Minister Brian Lenihan to bolster the banking sector as well as details of the first tranche of loads to be transferred to the National Asset Management Agency (NAMA).

NAMA announced today that it has taken over 1,200 loans for €8.5bn at a 'haircut' of 47% on their €16bn book value.

Employers’ group IBEC described the plan as a “decisive move towards purging the banking system of bad loans” which was "a key milestone on the way to restoring international confidence in the Irish economy”.

“While the level of public investment required was immense, the definitive nature of the intervention was necessary,” IBEC said in a statement.

"The economy needs a competitive and vibrant banking sector if it is to thrive, expand and create jobs,” IBEC Director General Danny McCoy said.

“Facing up to the full extent of the losses incurred due to the collapse of the property market is a necessary step towards achieving this goal.”

Small business group ISME meanwhile welcomed the announcement by Minister Lenihan obliging banks to increase the level of lending to viable SMEs.

The Finance Minister today instructed Bank of Ireland and AIB to each make €3bn available for lending to business this year and next.

“The Association demands that the Minister go a step further and ensure that not only will the banks have to increase their lending to the SME sector, but that the bank lending costs are not prohibitive, through interest rate and charge increases,” ISME Chief Executive Mark Fielding said.

“NAMA will eventually lead to a stronger banking sector, but it will also lead to a substantially weakened indigenous SME sector, unless the Government makes good on its commitment to increase bank lending.”

Commenting on the transfer of the first loans to NAMA, Director of the Small Firms Association, Patricia Callan said: “whilst this is a welcome development in the continuing efforts to stabilize the banking sector, it will have no direct benefit to small business lending."

"It is clear that the banks’ ability to lend to small businesses is curtailed at present, not by their own liquidity, but by their risk averseness in deciding to back businesses, which do not live up to the banks’ assessment of “viability”," Ms Callan said.

“When a small business fails, it is not because it runs out of customers, ideas or products. It simply runs out of money. With one in four small businesses in Ireland not getting enough credit, we have a very serious problem."