An estimated €2bn in income is being lost to the Irish economy this year as banks withdraw hedging lines of credit from smaller corporate clients in an effort to conserve capital, according to treasury consultants.

The withdrawal of the facilities, which businesses use to fix rates on debt or to protect against adverse moves in currencies, is taking billions out of the economy in extra costs and lost value-at-risk, according to John Finn, managing director of Treasury Solutions.

"Banks are so tight on capital right now they're not able to put lines in place," he said.

"The problem is they won't allow companies to hedge. Customers are stuck on the spot rate with no certainty. They're totally exposed to the market."

In order to fix interest rates on debt or to hedge forward foreign exchange, companies need hedging lines approved by the bank, as swaps, forward contracts and other derivatives require a certain amount of capital. But many banks are pulling back on these lines of credit, especially to smaller corporate customers, hampering investment, expansion and export opportunities.

"It's a bigger problem for the large SME which isn't multi-banked," said one senior banker.

"There is no question that capital is tighter and it's a very volatile market with big derivative risks."

There is an estimated €50bn in debt to non-property companies in the Irish economy.

A regular interest rate cycle would see a rise of 2%-3% from trough to peak over two or three years. Finn said this put a minimum of €2bn in extra costs or value-at-play here over that time period.

In the case of exports and imports the non-eurozone figures for 2009 were €50bn and €34bn, respectively.

The gap between high and low of the various currencies against the euro averaged 20%-25% in the year. This suggests a value at risk of €16.8bn-€21bn. Because larger companies are reasonably good at hedging and have internal capacity for managing risks, it would not be unreasonable to assume that there is €1bn-plus of value there each year, according to Finn.

He estimates at least €35bn in the Irish economy is totally exposed to rising rates if Jean-Claude Trichet or any of the other major central bankers change policy in the next year.

"In an environment where interest rates are low and expected to rise, most companies will be looking to fix," said Finn.

"Treasurers have nowhere to go to sort this out quickly."