John Trethowan: discussions over lending

AIB and Bank of Ireland are pushing the Credit Review Office to publish monthly data on individual bank business lending rather than making only private quarterly reports to the Department of Finance.

The two banks are in discussions with the department and the head of the Credit Review Office, John Trethowan, about their SME lending plans. Full details of how these plans will be reported and monitored will be finalised shortly, but bank sources have said they want the data made publicly available.

Trethowan has been tasked by finance minister Brian Lenihan with making sure each of the big two banks does €3bn in new SME lending in both 2010 and 2011. The lending targets were imposed as a condition of the €3.5bn in recapitalisation each bank has received from the National Pension Reserve Fund.

Bank of Ireland said it did €2.9bn of SME loans in 2009, while AIB lent €2.5bn to small and medium businesses.

Trethowan is also running a credit appeal process for business owners who believe they have been treated unfairly. The office has been open to appeals since the beginning of April and both banks have said some of their customers have already brought cases to Trethowan.

Enterprise minister Batt O'Keeffe recently advised businesses to make all credit applications in writing to create an audit trail for possible appeals.

Both AIB and Bank of Ireland have said they are trying to make credit available to businesses, but demand is weak and viable businesses are thin on the ground. However, current account balances among small and medium business customers of the two main banks are beginning to improve, with more small firms moving into the black in 2010 compared to last year, according to AIB and Bank of Ireland.

The banks are trying to improve their business lending skills, as asset-based lending is no longer the norm at either institution, bankers said.

Bank of Ireland recently advertised for new business banking managers to bulk up its talent, while AIB said it is doing extensive internal training to help its lending managers meet the needs of business customers.

AIB also announced last week it had allocated €100m in funds made available to it from the European Investment Bank (EIB) last year. AIB, Bank of Ireland, Ulster Bank and Bank of Scotland Ireland received €300m from the EIB last year to lend to developing businesses. The banks had a hard time placing the money, however, due to strict conditions attached to the discounted funds. For instance, businesses could not use the money for working capital. By the end of 2009 less than half the €300m had been placed.