NEW CREDIT INITIATIVE TO MAKE BANKS LEND TO SMEs - Central Bank figures yesterday showed another fall in lending to business. The figures may have been swallowed up by news of the recapitalisations, increased capital reserves and NAMA discounts, but the Minister for Finance on Tuesday announced new financial commitments to the small business sector, so they can access the credit and financial services they need. AIB and Bank of Ireland have to make €3 billion each available for new or increased credit facilities, including working capital, this year and next. Both also have to provide €20m for seed capital to Enterprise Ireland supported ventures; and €100m for environment, clean energy and innovation funds.
Both banks have to set out their lending plans within six weeks. These plans are to be reviewed by John Trethowan.
Mr Trethowan says he has arranged to see both AIB and Bank of Ireland next week to hear their initial proposals on how they are to achieve this plan. He says tracking systems will be devised on amounts over time and says he hopes the banks will not look at the €3 billion figure as a limit, but rather as a target which can be surpassed. 'Good lending is good business,' he states.
Mr Trethowan is also heading up another process, the Credit Review, which will allow small and medium sized firms, sole traders and farmers who have had credit refused or withdrawn, to apply for independent review of the bank's decision. He says he will go to the banks with his opinions on the credit and ask the banks to explain why they refused the loan.
John Finn of Treasury Solutions - who negotiates bank funding on behalf of his clients - says he likes the proposal, but has reservations. He says that Mr Trethowan and his team can not compel the bank to make credit available, they have to rely on moral persuasion which undermines what they can do to a significant extent. He also says that the loan threshold of €250,000 is far too low as he says the amount can potentially apply to companies with turnover of €50m with 250 employees. These companies should have borrowing capacity of potentially €3-5m.
John Threthowan of the Credit Review group is at www.creditreview.ie
Telephone: 1850 211 789
Email: info@creditreview.ie
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MORNING BRIEFS - Patrick Honohan, the governor of the Central Bank, has an opinion piece in the Financial Times today. He says the runaway credit binge led by Anglo Irish Bank, caused most of the damage, reputational and financial, in Ireland's crisis. He also says that free of the most impaired part of their portfolio, and under new management, the Irish banks now have the ability and the incentive to refocus on providing financial services to support the recovery of the country's economy.
*** Oil firms could be given the chance to explore for reserves off the US coast for the first time in decades, under plans outlined by US President Obama. The White House says drilling will be allowed off Virginia and considered off much of the rest of the Atlantic coast. The plans would overturn moratoriums on exploration put in place in the 1980s and the move is designed to cut US dependence on foreign oil. Environmental campaigners have denounced the plans, with Greenpeace saying it adds to the US "addiction to oil".
*** Unemployment across the euro zone hit 10% in February, the first time it has reached double figures since the euro was introduced. The jobless figures showed large variations - in Spain the unemployment rate is at 19%, while in the Netherlands it is just 4%. Meanwhile, CSO figures showed the Irish unemployment rate was 13.4% in February. The euro zone's rise in unemployment is being seen as a further sign that the its recovery from recession remains slow.
*** On the currency markets the euro is trading at $1.3501 cents and 88.74 pence sterling.
