• SBCI lending must be monitored to ensure SMEs benefit.
• Previous mis-allocation of low interest funds must be allowed.
ISME, Friday 31st October 2014.
ISME, the Irish Small and Medium Enterprises Association, welcomed the launch today (31st October) of the Strategic Banking Corporation of Ireland (SBCI), which is intended to provide low-interest rate loans to SMEs. However, the Association warned that adequate oversight will be required to ensure that the two rescued banks, AIB and Bank of Ireland, allocate the €800m of funding to SMEs only and not to less risky large corporations as happened in the past.
ISME CEO, Mark Fielding, commented, “While we welcome this long awaited initiative, it is important that Government makes it clear to the banks that this funding is not to be misallocated. It is intended that the funds will be used by SMEs and no excuses for the allocation of the funding elsewhere should be accepted. An oversight body must monitor the situation strictly and banks must be compelled to report to this body regularly. The banks cannot be allowed to revert to past form when they used the cheaper funds in the nineties to refinance larger businesses. Penalties for non-compliance should be enforced.”
ISME recommends that monthly returns on loans made, be returned separately to the central bank, showing the type, duration and interest rate on each loan made from SBCI funds as well as recipients by size and sector. This will assist in monitoring the loan books and hopefully stop the rescued, risk-averse banks dealing only with 'low or no risk' lending.
“This initiative could potentially be of great benefit to job and wealth creating Irish SMEs but only if the Government ensures that the bailed out banks stick to the rules,” concluded Fielding.