Tackling SME debt vital to protecting jobs in the economy – McGrath

Fianna Fáil Spokesperson on Finance Michael McGrath has called for a more comprehensive approach to dealing with SME debt following confirmation that AIB and Bank of Ireland are meeting the initial targets set for them for restructuring distressed SME loans.

Deputy McGrath commented: “Considerable attention has been given to the issue of residential mortgage arrears. This is understandable given the importance of keeping families in their home. However the SME sector represents over 70% of private sector employment in the country.  We cannot have a sustained economic recovery without thriving local businesses. In tackling this issue the priority has to be to protect jobs in the underlying trading business where an SME is carrying large debts from property investment.

“While the Central Bank’s focus on addressing the issue of SME debt is welcome, the process would be greatly enhanced if – as in the case of mortgage arrears cases – the SME debt restructuring targets were published and the performance of the banks was subject to public scrutiny. On an issue of this public importance, it is not acceptable that the Central Bank will not confirm the amount of SME debt that has been restructured so far.

“I welcome the confirmation by Cyril Roux, Deputy Governor (Financial Regulation), Central Bank of Ireland of the range of options open in restructuring SME debt. In his reply the Deputy Governor notes that among the sustainable solutions that can be considered are “agreed asset sales, term extension, part capital and interest payments, interest only, receivership and examinership.”  This is a broad range of outcomes with significantly differing impacts on the SME and its employees. In the case of residential mortgage arrears there is now a quarterly update as to the success level of each differing restructuring. I believe this should be done also in the case of SME debt.

“Currently targets are only in place for restructuring SME debt in respect of the pillar banks. While they are the main players in the SME space there are other significant lenders who I believe should also be subject to a programme of published targets along the lines of the Mortgage Arrears Resolution Targets. This will help to ensure a comprehensive approach, particularly in cases where a firm has debts across a number of banks.”