Are the Irish Banks Lending Any Money ?

[Dr. FIVE]

Take it no one is going mention the banks are rotten to the core then.

[disability student]

Had a project which i had interviewed with various business people last year as they all said that their banks refused to lend it even an overdraft or short term loans. Banks were clever as they told them to fill out the forms at pre- approval stage for publicity purposes.

However when it came to post approval stage, nearly most of business people's application for funding/lending were turned down at 95%. They told us the best way was to hold on to cash and cut down their business costs. These small business are the lifeblood of our economy as they are vital in regard to employment/consumption.

In the coming months/years, many small business will go to the wall creating unemployment. It's strange that unemployment figures haven't gone down despite huge emigration for jobs especially youth and families are now starting to move. Thus domestic demand will drop further down. In turn, economy will drop down and borrow more thus increasing our debt levels.

Also increasing impairments in the main bank's balance sheet would require more re-capitalization which haven't hit home yet. When it does, i wonder would these banks collapse?

[Slim Buddha]

Had a project which i had interviewed with various business people last year as they all said that their banks refused to lend it even an overdraft or short term loans. Banks were clever as they told them to fill out the forms at pre- approval stage for publicity purposes.

However when it came to post approval stage, nearly most of business people's application for funding/lending were turned down at 95%. They told us the best way was to hold on to cash and cut down their business costs. These small business are the lifeblood of our economy as they are vital in regard to employment/consumption.

In the coming months/years, many small business will go to the wall creating unemployment. It's strange that unemployment figures haven't gone down despite huge emigration for jobs especially youth and families are now starting to move. Thus domestic demand will drop further down. In turn, economy will drop down and borrow more thus increasing our debt levels.

Also increasing impairments in the main bank's balance sheet would require more re-capitalization which haven't hit home yet. When it does, i wonder would these banks collapse?

Hopefully.

[C. Flower]

Was listening a lot of the day to discussion on this.

I think few people who have been reading this forum could be surprised to find the banks aren't lending. The idea that the banks were being stuffed with public money in order to make sure we had a functioning economy was Lenihan's mantra and a plain lie. The cash was to enable the banks to survive and pay back bondholders.

The agreement with the Troika involved shrinkage of the Irish banking sector and bigger cash buffers in banks. Given that there is also a massive level of mortgage default coming down the pipeline, and little business confidence, why would the banks lend?

There are all kinds of wheezes going on to make it seem that people are offered loans.

One I've heard mentioned today is to offer a loan, but to require cash deposit collateral of the same amount, but with the interest paid on the loan being much less than that on the collateral cash deposit.

[C. Flower]

Pat Farrell - "A Banker's Perspective" on mortgage debt and personal insolvency.

http://www.accountingnet.ie/law_regu...erspective.php

Pat, speaking on behalf of the Irish Bankers Federation today on RTE, was outraged that the Central Bank had issued a "populist" report that highlighted the very low levels of lending in Ireland. Second lowest after Greece.

[C. Flower]

The Finance Committee of the Oireachtas will "get to the bottom of the controversy" in September.

http://www.oireachtas.ie/parliament/...e-9095-en.html

[C. Flower]

Pat was very happier with the Mazars report last month. The Mazars Reports are commissioned by the Department of Finance.

Is there a schism between the Central Bank and Department of Finance on this ?

The Central Bank report -

The Central Bank of Ireland today publishes new economic research (Economic Letters Vol. 2012, No. 8) entitled ‘Irish SME credit supply and demand: comparisons across surveys and countries’. The Letter compares survey responses on Irish SME credit supply and demand across survey sources and relative to euro area countries for the period September 2011 to March 2012.

The key findings of the research are as follows:

• The conclusions concerning Irish SMEs’ credit supply and demand vary only negligibly between the Department of Finance’s Mazars survey and the ECB’s SAFE survey.
• Rejection rates for SME loan and overdraft applications in Ireland are the second highest in the euro area, behind Greece.
• Changes in terms and conditions of bank credit (interest rates, collateral requirements, size of available loan) in Ireland are also among the least favourable in the euro area.
• As measured by firms’ reported changes in their need for bank financing, credit demand in Ireland lies marginally above the euro area average.
• As measured by application rates for loans or overdrafts, Irish SME credit demand lies marginally below the euro area average.
• Ireland has the second highest share of discouraged borrowers (firms who do not apply for a loan despite requiring credit) in the euro area.

http://www.centralbank.ie/press-area...ingMarket.aspx

The Mazars SME Lending Report.

http://www.finance.gov.ie/documents/.../mazerssme.pdf

Pat Farrell happy with the Mazars Report -

http://www.irishtimes.com/newspaper/...reaking24.html

[C. Flower]

Take it no one is going mention the banks are rotten to the core then.

Pat Farrell, CEO of the Irish Banking Federation was formerly the General Secretary of Fianna Fail.

In 2011 on their way out of office they put Pat on the HSE, the Dormant Accounts Committee and the Board of the VHI.

http://www.independent.ie/national-n...e-2498058.html

Fianna Fail is utterly shameless when it comes to appointing party cronies to state boards.
In recent years, former Fianna Fail general-secretary Pat Farrell has been appointed to the boards of the Health Service Executive, VHI and Dormant Accounts Board.

[Dr. FIVE]

add in this from 2010

http://www.independent.ie/business/i...g-2257332.html

"Some business owners used their profits to invest in rental properties during the boom,'' said John Trethowan, credit reviewer for the Government. "As a result, these businesses are now deprived of the cash reserves that would have assisted their survival in the downturn,'' he added.

Mr Trethowan outlined a series of findings on the banks' recent lending performance and on why some applications get turned down. He said after two difficult years many SME's have had their net worth wiped out, leaving banks with difficult decisions on the level of risk they are prepared to accept.

I dont know how credible that is given the source is government but it seems quite plausible imo. Certainly a factor. The banks are all too aware of the danger sitting on assets half their worth.

[Monetpenny]

I’ve known that banks haven’t been lending for some time.
As evidence I present the case of my brother-in-law.
He is quite a successful businessman.
2 yrs ago his company was making profits of €300k per yr.
His company had no borrowings & had assets that included a new warehouse that cost €1m to build (with no borrowings)
He owned his own home (no mortgage on the property) & he owns 3 residential properties in Cork city (no mortgage on any of them).
The local AIB branch was for sale at a total cost of €1.65m plus expenses.
He had bank deposits of €1.35m.
AIB had a rental agreement to rent the bank branch for approx €170k p.a. for 20yrs.
He wanted to borrow €300k over 2 yrs & he actually told me he expected he’d have it paid off in 1yr.
It was the 1st time he had ever approached a bank for a loan & he couldn’t get the money from either the AIB, BoI or Ulsterbank which were the 3 banks operating in the town where he lives.
He did eventually buy the bank & his company is now making profits of €500k p.a. never mind rental income from the residential properties & he bought a holiday home in Youghal. Again with no borrowings.

These banks can protest all they want, but if they are unwilling to lend a 20% loan over 2 years then they are not functioning as banks.

[C. Flower]

I’ve known that banks haven’t been lending for some time.
As evidence I present the case of my brother-in-law.
He is quite a successful businessman.
2 yrs ago his company was making profits of €300k per yr.
His company had no borrowings & had assets that included a new warehouse that cost €1m to build (with no borrowings)
He owned his own home (no mortgage on the property) & he owns 3 residential properties in Cork city (no mortgage on any of them).
The local AIB branch was for sale at a total cost of €1.65m plus expenses.
He had bank deposits of €1.35m.
AIB had a rental agreement to rent the bank branch for approx €170k p.a. for 20yrs.
He wanted to borrow €300k over 2 yrs & he actually told me he expected he’d have it paid off in 1yr.
It was the 1st time he had ever approached a bank for a loan & he couldn’t get the money from either the AIB, BoI or Ulsterbank which were the 3 banks operating in the town where he lives.
He did eventually buy the bank & his company is now making profits of €500k p.a. never mind rental income from the residential properties & he bought a holiday home in Youghal. Again with no borrowings.

These banks can protest all they want, but if they are unwilling to lend a 20% loan over 2 years then they are not functioning as banks.

A good illustration. Two things strike me, and one is that the banks were simply excluding a whole category of loans - commercial property investment by SMEs - or, in small town Ireland, that they had other favoured clients who might have been trying to get the building for less.

In small town Ireland, pre boom, both possibilities would have been routine.

The other side of this is that the banks have very good knowledge of the general state of the economy, through our bank accounts and bank debts, and they can see that it is going to continue to shrink. The EU plans to shrink the banking sector themselves meant less competition to lend and less available funds.

We are now back to the banking 80s in terms of practice of the banks, but in a shrinking rather than growing economy.

The point was made yesterday that local banks don't have the expertise (or interest, I would say) to assess business plans, and have always relied on either lending for property, or demanding property collateral, even for business loans, as it is what they are comfortable with. Now that property is in general a busted flush, they have no framework within which to assess loan applications.

In a case I knew of in the 90s, a new business with a signed and insured contract with a government body for a £250,000 one year contract could not get a working overdraft of £50,000 from the B o I to get the project going.

It would not be like that in Germany.

[Monetpenny]

or, in small town Ireland, that they had other favoured clients who might have been trying to get the building for less.
That is very perceptive of you.
The bank staff told him of 2 branches that were available for sale many miles away.
I can't remember where the 1st was, but the other was in Letterkenny (330miles).
He found out through the auctioneer that the local branch, which is within 1 mile of his residence, was also for sale.

When banks are allowing themselves to be run like this do they have any chance of recovery?

[Dr. FIVE]

Haven't followed the news today but has anyone tied yesterday's headline to today's 80,000 mortgage arrears?

[C. Flower]

Haven't followed the news today but has anyone tied yesterday's headline to today's 80,000 mortgage arrears?

Yes. Pat Farrell was interviewed on RTE, I think by Philip Boucher Hayes. He was pressed on the Central Bank report, said he still hadn't looked at the detail and relied on the Mazars report. But he also said that the general state of health of the economy was so inferior to that of Germany that of

I think the number of distressed firms is more directly connected to SME loans than are mortgages. There was a recent report that gave a very high level operating below break even. A lot of loan approaches made to banks must be being made by firms that the banks may have reason to think will not return to profitability.

They won't lend to Greenstar, for example.

It would be interesting to know whether Greenstar was experiencing a big fall in numbers paying for waste collection.

[ZeroWedge]

The point was made yesterday that local banks don't have the expertise (or interest, I would say) to assess business plans, and have always relied on either lending for property, or demanding property collateral, even for business loans, as it is what they are comfortable with. Now that property is in general a busted flush, they have no framework within which to assess loan applications.

In a case I knew of in the 90s, a new business with a signed and insured contract with a government body for a £250,000 one year contract could not get a working overdraft of £50,000 from the B o I to get the project going.

The banks have no problem lending to big business.
Site Serve - €150 million loan - defaulted
Greenstar - €83 million loan - defaulted
Eircom - €3 billion loan - defaulted
TV3 - €80 million loan - defaulted

A lot of these really big loans have one thing in common. Theyre nearly all associated with a certain carribean tax-dodger. The day Im just waiting for is when Digicel default on their $5billion loan. I mean can you really service a loan that size selling text message to the people of Haiti and Jamaica?

Default is part of their business model.