John Trethowan, Credit Reviewer has issued the seventh report on the activity of the Credit Review Office.
According to the report the AIB, BoI, KBC, and Ulster bank have successfully introduced a common format application for bank credit, an initiative featured in ‘The Voice of Small Business – A Plan for Action’.
Further steps are also being taken to assist SMEs and farms through the credit application process including an agreed definition of ‘viability’ and a standard format for business plans, including a standard format for cash flow planning which would assist borrowers and banks in knowing what is required to access credit. Following from this, the cost of preparing a business plan could be included into the bank facility requested. This would have the knock-on effects of improved quality plans and affordable business planning support for small businesses.
In relation to the commercial property development sector, while this is a particularly complex area, there is a need for the provision of finance for some viable deals such as properties priced as such to suggest attractive rental yields. Should these viable properties remain on the market due to lack of financing, prices will continue to spiral downwards.
The Minister for Finance set SME/farm lending sanction targets for the two pillar banks, AIB and BoI of €3bn for the period January 1 2011 to December 31. Following a subdued period, as outlined in the fifth report of the Credit Review Office, lending activity increased and annual targets were met.
As the banks are witnessing a contraction in their balance sheets due to the level of loan repayments exceeding the demand for new lending, Mr Trethowan offered a number of additional suggestions. New money, he suggests, is desirable for growth, demand for it will increase as the economy recovers and banks can only lend new money to businesses that request credit and can repay that credit.
The banks were also obliged to ensure that no geographic region or trade sector be disadvantaged when lending. Monitoring has shown that no sector or geographic region has been disadvantaged by any of the Pillar banks.
Furthermore, the report stresses that while the overall impression is banks are not lending, a recent survey and reports from BoI and AIB demonstrate their willingness to lend to viable businesses.
Speaking following the publication of the report, Minister for Small Business, John Perry TD requested that businesses that are experiencing difficulties, or have been refused access to credit to contact the Credit Review Office (CRO) to have their case examined.