Small and medium enterprises have been left in the lurch as the survivors of the banking crisis turn their attention to bigger-ticket clients. NIB's decision to leave the high street to focus on corporate and high-net-worth customers is the most recent and prominent example of the trend.
"[It's] hardly a surprise although it further reduces choice for SMEs," said John Finn, managing director of corporate finance consultants Treasury Solutions. "In the context of both AIB and BOI shrinking their balance sheets in the coming years, funding will represent a real challenge for many."
Last month the Credit Review Office, headed by former NIB chief executive John Trethowan, reported a "diminishing number of banks were supplying the SME market". Trethowan also found the demand for credit at Bank of Ireland and AIB – the two biggest SME banks – was declining. Nonetheless he singled out the big two and Ulster Bank as lenders prepared to do business with SMEs, although it remains to be seen how the bailout conditions will affect this.
ISME's most recent quarterly survey, released last week, found some improvements in access to credit for small businesses. But ISME chief Mark Fielding urged the government to accelerate progress towards a 'third force' businesss bank to provide more competition to Bank of Ireland, AIB and Ulster, citing the higher cost of credit as a barrier to economic recovery.