About 1 in 14 SME loans is considered to be highly vulnerable to an economic downturn.

This is according to an analysis of borrowings by small and medium sized companies carried out by the Central Bank.

The loans amount to some €875 million, accounting for 7.3% of all SME loans at three lenders; Bank of Ireland, AIB and Ulster Bank.

The banks' balance sheets contain more than €12 billion in total outstanding loans to SMEs.

While the vulnerable borrowers are performing and up to date with their payments, the research indicates that they are more likely to encounter difficulty in repaying in the event of an economic downturn.

Over half of the loans are to businesses operating in the accommodation, food, wholsale and retail sectors.

There is a wide geographic spread with high vulnerability borrowers in all regions, the report says.

The report author, Niall McGeever, calculated a vulnerability score for each performing Irish SME exposure by linking borrower characteristics and macroeconomic conditions to historical default outcomes. 

A higher vulnerability score corresponds to a higher likelihood of encountering repayment difficulty in the event of an economic downturn.

The report finds evidence of a general improvement in the condition of the SME loan portfolio overall.