Banks are Committed to Supporting Viable SMEs

The Irish Banking Federation (IBF) welcomes publication today of the Central Bank’s Review of SME Lending Strategies in confirming the many positive developments and improvements that are evident in the bank/SME relationship and identifying ways in which this important relationship could be further enhanced.

The IBF finds encouraging the Central Bank’s findings of significant improvements in the policies and practices employed by banks in support of their SME customers, including the following in particular that:

  • banks are now focusing on improving their SME customer engagement and have made progress in developing quality SME plans
  • banks’ SME marketing plans are of a good overall quality with evidence of regular communication with SME businesses
  • the amount and standard of formal business credit skills training and staffing is improving in banks along with the recognition of the need for further progress
  • banks are not reducing their lending standards in an effort to achieve particular lending targets
  • banks are actively and positively engaging with the independent Credit Review Process on SME credit appeals; or, where outside that particular process, applying the principles of the CRO process.

IBF also notes that these improvements are taking place at the same time as considerable manpower and other resources have been required to be devoted to managing the bank restructuring process, engaging with a more extensive regulatory approach and managing larger numbers of underperforming SME and personal portfolios.

IBF firmly believes that the banks doing business with SMEs today are acutely aware of the challenges they face in refocusing their business model from the property-based lending of the past to cashflow-based lending – a point also acknowledged by the Central Bank.  While they are actively addressing these challenges, IBF for its part has been working with Enterprise Ireland to help identify the appropriate banking support framework for our exporting SMEs.

Commenting on the Central Bank review, the IBF’s Chief Executive, Pat Farrell, stated:  “Banks remain fully committed to supporting viable businesses and today’s Central Bank review is welcome confirmation of the range of ongoing work by banks in this regard and affirmation of the need to continue to build on this good work – such is the importance of the SME sector to our economy.  Up to €14 billion in SME funding for new or increased credit facilities is being made available over the course of 2010-11 by banks here.  These initiatives are complemented by a range of non-financial advisory and mentoring support services.  It is notable that in the latest Central Bank Quarterly Bulletin, also published today, the recent decline in credit is presented as being not simply a supply side issue but also a demand side one.  This is why we would continue to encourage all SMEs requiring credit to apply to their bank and to provide the relevant supporting documentation required by the lender to make an informed decision.”

Editors’ Note:  The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644

Supporting Ireland’s Small Business Sector

The Irish Banking Federation (IBF) welcomes the independent assessment by the Credit Review Office, as published today, that small and medium enterprises (SMEs) which present a sound business proposition supported by proper financial information and credible projections are successful in their credit applications.

However, the Office’s finding that many SMEs need to improve their business planning and financial skills requires a response across the wider business community and business organisations, relevant State agencies and the banking sector.

For its part, the banking sector is committed to working with other stakeholders in providing the financial and non-financial supports that the small business sector needs to help drive our economic recovery.  As things stand, a wide range of information and mentoring supports are made available to SMEs by the various business-lending banks.

However, it is clearly opportune that IBF and its member banks are currently collaborating with Chambers Ireland in the development of a new designated website which will provide a one-stop source for small businesses that will provide access to all the information they need to finance their business.

Notably, the Credit Review Office reports a continuing slowing demand for credit from SMEs.  IBF and member banks are currently participating in the work of a Department of Finance Stakeholder Group which includes the commissioning of new, independent market research to provide further insight into the nature and extent of SME demand for credit.

Note: The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 80 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Information: Felix O’Regan, Director, Public Affairs, IBF, tel. 6715311, 087 6481644

Rise in number of restructured mortgages reflects responsible lender/borrower management of arrears

  • Downward trend continues in court proceedings issued by mainstream lenders

The Irish Banking Federation (IBF) notes from today’s Central Bank statistics on mortgage arrears that the number of borrowers whose mortgages have been restructured has risen to 69,837.  In IBF’s view this is the expected outcome of a deteriorating economic situation for some borrowers and it illustrates that mainstream lenders are working responsibly with their customers to manage the situation where the basis for doing so exists.

The increasingly difficult economic circumstances in which some borrowers find themselves today has, not surprisingly, given rise to an increase to 7.2% (of all private residential mortgage accounts) in the level of arrears of 90 days or more.  While the vast majority of borrowers continue to meet their mortgage repayments, those borrowers facing difficulties are being assisted where there is any reasonable basis for doing so.

This is reflected in the 69,837 restructured mortgages now in place – of which 56% are not in arrears – and in the continuing quarter-on-quarter downward trend in the number of new court proceedings issued by mainstream IBF-member institutions (down 28% in Q2 compared to Q1 2011).  Significantly, while recording an increase, the level of repossessions still remains comparatively low – 22 per 100,000 mortgages here compared to 80 per 100,000 in the UK.

“These latest official figures show that IBF members are effectively applying the statutory Code of Conduct on Mortgage Arrears, the Standard Financial Statement and other voluntary measures to work constructively with customers in difficulty”, states Pat Farrell, IBF Chief Executive.  “As a result, the figure that we would expect to see increasing – namely the number of restructured mortgages – is doing just that.  And this is where the focus of IBF member institutions will most usefully remain.”

IBF strongly encourages borrowers who are under pressure with their repayments to communicate with their lenders in order to find a workable arrangement that will assist in the management of their financial difficulties and help to avoid repossession.

Note: The Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 80 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Director, Public Affairs, IBF, tel. 671531, 087 6481644

Mortgage Market Activity Remains Weak in Q2

  • 3,551 new mortgages issued in Q2 2011 to a value of €624 million
  • Home purchasers continue to dominate the market

The IBF/PwC Mortgage Market Profile published today shows that 3,551 new mortgages to the value of €624 million were issued during the second quarter of 2011.

The volume of new lending in Q2 is down 54.6% on the previous year.  And while it is up 9% compared to the previous quarter, the seasonal pattern of mortgage lending can typically result in a higher level of lending at this stage of the year.

However, the key home purchaser segments of the market, first-time buyers and mover purchasers, continue to dominate this smaller market.  Together they now account for over 78% of the market by value and 70% by volume – more than three-quarters of all mortgage credit issued now goes to the home purchasing segments of the market.

Lenders generally report that subdued underlying demand for new mortgage finance continues to be driven by a range of factors.  These include uncertainty around the employment situation and property price trends, together with a weakening consumer sentiment.  At the same time, lenders point to the need for prudent lending with the all-important focus on the borrower’s capacity to repay.

Commenting on the data, IBF Chief Executive, Pat Farrell, stated:

“Current mortgage market activity reflects the general macroeconomic environment.   In these challenging times manageable borrowing and prudent lending are to be expected.”

The IBF/PwC Mortgage Market Profile can be viewed on the web at here.

Note:  Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311