Medium Industries Welcome Banking Plan

Irish small and medium industries have welcomed Brian Lenihan's plans to recapitalize the State's banks, which they expect to kick-start the credit cycle.

The Irish Small and Medium Enterprises Association (ISME), said this morning it welcomed the announcement by the Minister for Finance to force the Banks to increase the level of lending to "cash starved" enterprizes.

The Association called on the Government to rigorously monitor the Banks, to ensure that the commitment to increased lending is met and that viable businesses that require finance receive it. Any Bank that refuses to comply should automatically be penalised and refused any further State assistance in the recapitisation programme.

ISME, Chief Executive, Mark Fielding said: “The Association demands that the Minister go a step further and ensure that not only will the Banks have to increase their lending to the small and medium enterprise sector, but that the bank lending costs are not prohibitive, through interest rate and charge increases.”

Fianna Fáil TD Michael McGrath, who is Vice Chairperson of the Joint Oireachtas Committee on Finance & The Public Service, also welcomed the announcement saying that AIB and Bank of Ireland will between them make available targeted lending of €12 billion over the next 2 years.

Deputy McGrath said: "I acknowledge that the multi-billion bail out of Irish Banks announced by the Minister will be a bitter pill for taxpayers to swallow. However, the specific lending targets being imposed on AIB and Bank of Ireland will make access to credit much easier for viable businesses. The improved availability of credit will help to save jobs and will make it possible for businesses to consider expanding again in the right circumstances. I note that ISME has this evening welcomed the Minister's commitment to increase the level of lending available to [businesses]."

However, the European Commission may be putting a dampener on the lending surge as it has launched an inquiry into the State’s support for AIB, under which it will scrutinise whether the cost of winding it down exceeds the cost of injecting billions of fresh capital.

The news comes as the bailing out of the state-owned Anglo Irish Bank emerged as breaching the €22 billion threshold.

(DW/GK)