State review team finds no evidence of credit squeeze

THE Government’s new Credit Review Office has concluded that no evidence exists of any credit constraints to the small business and farming sectors on behalf of the country’s two main banks.

However, the Office — which was launched at the beginning of April to review bank lending practices to the SME sector — has disputed a third of the cases it has reviewed in its first three months in existence.

At the launch of his first quarterly update yesterday the CRO’s head, John Trethowan, said that of the six reviews into bank lending decisions he has completed to date, three have been upheld by him and two have been disputed, while “more work is required by both borrower and bank” in the other.

The two disputed decisions both relate to Bank of Ireland. Another six loan decision reviews — covering Bank of Ireland and AIB — are still in train.

Mr Tretheowan also said that the fact that many SMEs have seen their net worth seriously eroded since the recession began has presented the banks with difficult decisions over the levels of risk they’re being asked to assume on lending applications.

He said, however, that there exists “a lack of experience” among some front-line staff in the banks dealing with SME loan applications.

“However, I found no evidence of bank lending policies which constrained the supply of credit to viable businesses in either of the banks,” he said.

Meanwhile, while small firms lobby group ISME has cautiously welcomed the Government’s plan to ensure the top two banks lend a combined €12 billion to the SME sector over the next two years. It said it remains “unconvinced” by the Credit Review Office.

Last month, ISME said 80% of its members are still unaware of the office’s existence. Yesterday, ISME chief executive, Mark Fielding, reiterated the need it to be better promoted and not used as “a talking shop”.

The Labour Party’s enterprise spokesperson Willie Penrose added that there is “a huge gap between the findings of the Credit Review Group and the experience on the ground”.


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