Business leaders have called on the Central Bank to investigate claims that banks are illegally asking for family homes to be put up as collateral for loans.
ISME – the organisation representing small and medium enterprises – has carried out a survey which it says indicates that banks are continuing to refuse lending to a majority of business applicants.
ISME says that Government calls for an increase in lending by banks to business have fallen on deaf ears, and that a lack of credit has created critical conditions for many business owners who are now, the survey says, desperate.
The organisation claims that banks are putting the future of thousands of small and medium businesses and their employees at risk, and wants to see bank staff being re-educated about business lending practices.
ISME says that of the over 800 business surveyed, the majority revealed that they were refused bank credit in the past three months. A similar figure was recorded for the first three months of this year.
A quarter of respondents said that the possibility of putting a family home up as collateral was raised. One in eight said their bank requested that such collateral be provided.
ISME warns of what it calls ‘a sinister return by some banks to outlawed actions’ and says that tough action is needed to counteract what it calls a ‘two fingered’ policy response by bankers.
IBF questions ISME figures
The Irish Banking Federation has said it seriously questions the representativeness and accuracy of the ISME research.
The IBF says the only authoritative, independent study commissioned by the Government was that undertaken by Mazars, which shows principally that eight out of ten credit applications are approved and that one-third of existing SME loans are on the watch list (ie they are impaired), which is the factor essentially accounting for strains on credit supply to the SME sector.
The Credit Review Office was set up by Government as an ongoing appeals process for business credit applications that have been rejected.
The first set of figures are due to be published by that office later this week and the IBF believes that these figures will simply not reflect the sort of misrepresented trend in the ISME survey.
