Executive calls for State lending to SMEs

The Government will have to set up a State-sponsored financial institution to lend money to small and medium-sized businesses, a senior Bank of Ireland executive has said.

The declaration was made yesterday by Denis O'Donovan, head of group non-core, Bank of Ireland, when he took questions at the annual conference of the Irish International Business Network (IIBN) in London.

“It is a personal view, I am not expressing a view on behalf of the bank, but the solution lies outside of the banking system,” he said.

Nevertheless, Mr O’Donovan rejected criticism that Bank of Ireland is not lending sufficiently to SMEs, saying lending figures “had improved in every quarter”.

“The situation is not as bad as it is portrayed, some of the employers’ organisations have spun it very well for other purposes,” he told the IIBN.

Filling a hole
However, the situation was not helped by the departure of ACC and Danske Bank from the Irish market in the past month: "Every time one of them leaves another hole is created and we have to fill [it]."

He said he was "very happy" that Ulster Bank is to remain: "I had feared that it would go into a non-core unit. If it did, of course, it would not be in the business of lending money."

Meanwhile, Mr O’Donovan insisted that BoI will continue to take a strong line with mortgage defaulters: “We were given capital by North American investors, we weren’t given it to write it off.”

“Of course you can’t get blood from a stone. Of course over time this has to be addressed,” he said, but he added that the number of repossessions would increase.

Responsibility
"Nine out of 10 of our mortgages pay on time, we have a responsibility to those people that we chase those who are not paying their mortgages," he told the IIBN, which now has chapters in Dublin, London and New York.

Criticising the European Commission, Mr O'Donovan said it had forced BoI to quit profitable businesses after it was bailed out by the Government.

“Under state aid rules, the guys in Brussels basically make you feel pain. You could imagine that they would try to do the sensible things and try to force you out of the things that are not helping.

“[But] the opposite is in fact true. What they try to do is make you feel pain in the businesses that are actually the best businesses. They forced us out of real estate lending [outside of] Ireland.

“They have now forced us out of asset management outside of Ireland, they have forced us out of security services outside of Ireland, which was a big earner.

“It is really beating the patient to death until they jump out of the hospital bed.”