Irish Banking Federation presents protocol for SMEs with debt difficulties

The Irish Banking Federation has published a protocol for SMEs in financial difficulties who have debts with a number of banks.

The move is designed to allow an SME in arrears, and with debts across a number of financial institutions, to communicate with the banks on a collective basis and to allow those banks to discuss and consider the case to seek a resolution to their difficulties.

It will apply to SMEs with debts of between €250,000 and €10 million. It will not be available to property-holding companies or non-trading entities and also excludes certain syndicates and special-purpose vehicles. Cases subject to receivership or examinership or proceedings under the new personal insolvency regime will also be excluded.

ACCBank, AIB, Bank of Ireland, Danske Bank, KBC Bank Ireland, Permanent TSB and Ulster Bank have all signed up to the framework. The protocol will involve the setting up of a banks' liaison group to enable the indebted business to engage with all debtor banks at the same time and to facilitate collective consideration of their case.

The group will facilitate the SME in submitting a proposal and each bank will be given “full and similar information for decision-making purposes”, according to the IBF document. The banks may also allow discuss collectively the position and to “proactively look at the options available”.

SME customers will be deemed to be in financial difficulty where they are in arrears with a credit facility for three consecutive months or where their overdraft has been exceeded for 90 consecutive days. The SME must be regarded as co-operating with the banks and all parties are expected to “act in good faith”.

The protocol is a recognition that the current bilateral discussions “may be cumbersome” for an SME”.