Two recent data releases show just how cold the climate has become for both SMEs and home owners.  On the SME side, a report commissioned by the Department of Finance has found that banks are refusing more loans to small and medium businesses than they are reporting. The five banks surveyed – AIB, Bank of Ireland, Anglo Irish Bank, National Irish Bank and Ulster Bank – report refusal rates of 14% but the report undertaken by accountancy firm, Mazars, suggests the real figure is 18%. The report points to inadequate recording of refusals by frontline bank staff as a reason why refusal rates have been underreported. This also raises the question of what constitutes a “refusal” – for example, if a bank offers a borrower a lesser sum than originally requested, or less favourable lending facilities, is this a refusal? The credit situation facing SMEs may be more precarious than headline figures suggest, particularly as SMEs’ revenues continue to take a pounding. (more…)

Given that the post-budget analysis is likely to focus on headline grabbers such as the public sector pay cuts, social welfare cuts and imposition of the carbon tax, its likely that a number of other measures announced in the Budget speech may not receive the attention they deserve. One such measure is the extension of the 6 month moratorium on home repossessions contained in the Irish Banking Federation’s (IBF) Code of Conduct on Mortgage Arrears by a further 6 months. Of course, all efforts to alleviate the difficulties facing those in danger of losing their homes should be welcomed. However, it still isn’t clear what endgame is envisaged here: is it just a case of avoiding the issue for a further 12 months and hoping that the much-fabled recovery comes to the rescue or will a coherent plan be put in place to assist those whose homes are at risk? No recovery is going to put the 200,000 recent additions to the live register back to work any time soon and should the unemployment rate rise above its current 12.5%, the threat of repossession will loom larger for even more households. Already the IBF has estimated that there are approximately 14,000 households in Ireland with mortgages in arrears. In the first seven months of 2009, the Irish courts granted mortgage lenders 138 orders for possession. The situation is clearly far more worrying than the Minister for Finance suggested in his budget speech when he stated that “only twenty homes have been repossessed by the institutions covered under the Government Guarantee in the first three quarters of this year”

So was there anything in the budget speech to indicate that a coherent plan of action is being formulated to assist those faced with the threat of repossession? Unfortunately not – and if the following pearl of wisdom from the Minister for Finance is anything to go by, it could be an anxious 12 months for thousands of home owners:

“Everyone has to play their part and I will require the banking industry to engage with Government to find innovative solutions to ease the burden for affected home owners.”

Maybe home owners, rather than bankers, would be a better source of innovative solutions.

Declan Curran