Fianna Fáil Finance spokesperson Michael McGrath has described the problem of legacy debt held by the SME sector as the forgotten crisis within the Irish banking sector.
He was speaking following media reports that Danske Bank is planning the sell off to a vulture fund over €500m worth of SME loans across 4,000 different customer accounts.
Deputy McGrath has repeated his call for the Sale of Loan Books to Unregulated Third Parties Bill to be published and its passage through the Oireachtas accelerated.
Deputy McGrath stated, “There was a brief flurry of attention surrounding SME debt earlier in the year following some pretty dramatic warnings from Prof Morgan Kelly of UCD. However, despite its importance as a sector to the overall economy, the problem of SME debt and its limiting effect on economic recovery gets relatively little attention in either political or regulatory circles.
“My colleague Dara Calleary and I have made various attempts to ascertain what targets are in place for dealing with SME legacy debt. The attitude of the government has been to tell us that all is in hand and we do not need to know the details of what is being done. This is a completely unsatisfactory situation. While the multinational sector is of vital importance, it cannot provide all of the jobs needs throughout the country.
“We need a vibrant SME sector which is profitable and viable. The crucial issue for many businesses is bad property investments which were made often at the encouragement of banks. In most instances the underlying business is in good shape but the capacity of many firms to benefit from an upturn in severely restricted by legacy property debt. We have seen some eye watering write down for very large firms on their debts. SMEs must look on in bewilderment at the lack of urgency which appears to attach to putting their loans on a sound long term footing.
“Fianna Fáil has previously suggested that targets for SME debt restructuring are needed not just for the two pillar banks but across the sector. This is brought in to sharp focus by the news that Danske Bank appear to be about to sell their SME loan book. The prospect of mortgage loans falling in to the hands of unregulated third parties has naturally caused considerable concern in the case of mortgage holders. We should be equally concerned about the impact of the sale of business loans. SMEs need to have certainty in their relationship with their bank as they have an ongoing need for services such as overdrafts, term loans and business advice.
“The issue of SME debt needs to be “moved up the political agenda” and the government needs to move swiftly to ensure that SMEs whose loans are sold do not lose vital statutory protections. If SMEs are left to the mercy of vulture funds with no statutory protection, jobs will be lost and viable businesses may be forced to close.”