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Debt Burden

Bank of Ireland: no debt write-downs for small businesses

As with mortgages, it seems the bank is taking a hard line on debt forgiveness.

BANK OF IRELAND has signalled that there will be no write-downs on debts owed by struggling small and medium businesses.

Head of Enterprise Development Gerry Prizeman told that the company’s hard line on mortgage debt forgiveness is likely to extend to SME debt, which is often linked to property borrowing.

“The chief executive has made the organisation’s policy clear on this. It’s a policy that the organisation would work to as our policy position.”

Chief executive Richie Boucher told a Dail committee last month that the bank would veto debt write downs for non-performing mortgages.

Fellow pillar bank AIB has written down €2 billion worth of debt linked to SMEs in the last year.

Refusal rates

Prizeman also challenged assertions made yesterday at the jobs committee by small business groups claiming that the refusal rate for loans from SMEs was much higher than reported by banks.

Pointing out that the usage of overdraft facilities by BoI clients last year was only 40 per cent, he said:

In a market where I’m being asked to believe that we’re not providing credit, and that people are saying they can’t get it, 60 per cent of the available facilities sit unused. I think that’s a number that bears some scrutiny.

Bank of Ireland do not release figures on the level of impaired SME debt they are carrying, he said, but pointed out that they have agreed solutions with 95 per cent of business borrowers in difficulty.

Maturity needed

Irish businesses should also be quicker to look towards non-bank sources  of finance when looking to raise cash, he argued.

He said that there was a reluctance among customers to relinquish any share of their company in exchange for cash, and in turn many seek bank debt instead of trying to raise equity.

He questioned whether it made sense for a borrower to “Look for a bank to have far more skin in the game than the owners of a business for a two per cent margin”.

“I think there’s a little bit of maturing to be done within the Irish psyche.”

He also said that Bank of Ireland is happy to talk to customers left “high and dry” by banks that are exiting the Irish market.

The bank is launching its national enterprise week this week with a series of events, including business breakfasts and social media clinics.

AIB wrote off €2 billion in SME debt in the last year>

Call for SME debt forgiveness to drive recovery>

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