Banks reiterate pledge to boost credit

COMMERCIAL LENDING:BUILDERS, SMALL business and multinationals look set to benefit from the increase in commercial credit that the Government hopes will result from recapitalising the Republic's biggest banks.

As part of the €7 billion deal struck with AIB and Bank of Ireland yesterday, both have “reconfirmed” a pledge made last December to boost lending to small and medium-sized businesses by 10 per cent.

The package which Minister for Finance Brian Lenihan announced last night also contains measures designed to ensure that the banks lend money to construction companies engaged on big projects and businesses which supply multi-nationals.

The Minister’s statement says that “the availability of a pool of skilled contractors available to support major national and inter-national companies and construction projects is an essential com-ponent of Ireland’s attraction for major investing companies”.

The statement points out that IDA and Enterprise Ireland-backed companies, and State agencies, have all reported that suppliers and contractors are having difficulty borrowing money, despite the fact that they are creditworthy.

“The recapitalised banks have agreed to work closely with the IDA, Enterprise Ireland and with State agencies to ensure the supply of appropriate finance to contractors engaged on major projects sponsored by them,” it says.

Builders could also potentially benefit from the banks’ commitment to increase lending to first-time house buyers by 30 per cent. If the available cash is not taken up, then the banks will make it available to small business.

The Financial Regulator will monitor this measure. The regulator will also publish a statutory code of practice on business lending this week.

The Government is commissioning a review of credit availability to business to ensure that viable enterprises are not being refused loans. This will report in five weeks.

Ibec, the employers’ lobby group, welcomed the proposals last night. Director general Turlough O’Sullivan said they would have a positive impact on businesses’ ability to raise cash and maintain activity.