HSBC: choosy

Small businesses are especially vulnerable to perceptions of sovereign risk when doing business abroad. Building banking relationships in foreign markets is becoming more difficult for exporting SMEs: hedging lines, transaction services and finance are all getting more expensive and harder to source.

Some foreign banks have unofficial bans on doing any business with Irish firms, according to market sources. Trade credit and insurance are also harder to come by, as counterparties seek to limit their exposure to further disruption in the Irish economy.

The problem is compounded by the stress in the local banking sector, where domestic institutions have been withdrawing available credit as they seek to shrink their balance sheets to comply with orders from the bailout troika of the European Commission, International Monetary Fund and European Central Bank. Where funding is available, SMEs are reporting that terms are shorter, making long-term planning difficult. This also introduces uncertainty to any deals undertaken by exporters.

Foreign banks in the local market are cherry-picking the most lucrative business, with Barclays, HSBC and now National Irish Bank focusing on high-net-worth individuals and large private firms looking to raise money in foreign capital markets. When they do commit to business with small and medium-sized firms, the privilege comes at a steep cost.