Irish banks ‘ignoring’ EIB funds for SMEs

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Two thirds of Irish bank staff admit to not being aware of European Investment Bank funding for small firms, despite a concerted push from Brussels to loosen the flow of liquidity to businesses across Europe.

The startling finding comes in a survey by the Irish Small and Medium Enterprises Association (ISME), which accuses banks of ignoring millions of euros in EIB funding earmarked for struggling SMEs. 

The EIB has made €350 million available at a reduced rate through commercial banks across Europe, but business lobby groups have continued to express concern that the funding is not getting to those who need it most. 

The European Commission’s representation in Ireland recently hosted an information day with high-level speakers from the EIB and European Investment Fund, but the business lobby claims that banks are now obstructing access to European cash. 

ISME said a survey of six Irish financial institutions also revealed “total ignorance” of a new lending code introduced in March this year which is designed to help small businesses in Ireland. The Irish government ordered banks to boost lending to small firms in return for a multi-billion euro injection of public funds. 

Mark Fielding, chief executive of ISME, said banks are being dishonest in publicly claiming to be “open for business” while failing to turn their words into actions. 

“Not only are banks being deceptive and obstructive in the roll out and administration of the EIB loans, but they are thumbing their noses at the law of the land by failing to instruct their staff on the lending code, a legal requirement under the recapitalisation bail out,” Fielding said. 

ISME called on the Financial Regulator to implement the new lending code, accusing it of being too close to the banks. 

Meanwhile, a separate survey showed that 733 Irish companies went out of business in the first six months of 2009, and 1,600 will be bankrupt by the end of 2010. 

Declan Taite, corporate restructuring partner at Farrell Grant Sparks (FGS), said his company has found an increase in business failures in the construction, engineering and retail sectors, as well as growing numbers of bankruptcies in the professional services and consulting services sector. 

“The vast majority of the failures result from lack of working capital or lack of cash. We’ve all seen a significant slow-down in the availability of liquidity in the market. There’s no working capital available for companies themselves and very little funds available for people to purchase their goods and services, so cash is the main issue,” he told Irish state broadcaster RTE. 

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