The Central Bank of Ireland has published the findings of a Review of the Small and Medium Sized Enterprises strategic lending plans of banks operating in the Republic of Ireland. The Review sought to assess:
- banks' risk appetite for SME lending;
- the overall quality of the banks' SME strategy and plans;
- the quality of risk management for this category of lending; and
- whether banks are developing the necessary skills to originate sound SME loan portfolios.
The findings and recommendations of the Central Bank are detailed in the Review under the following headings: (1) Executive Management and Strategy, (2) Board, (3) Credit, (4) Finance, (5) People, (6) Marketing and (7) Internal Communications.
The Review included six banks with the principal focus on AIB, Bank of Ireland and Ulster Bank as the largest and most active lenders to the SME sector. The Central Bank also engaged with KBC Bank Ireland plc, ACC Bank plc and Danske Bank Group (trading as National Irish Bank).
The Irish Banking Federation has welcomed the publication of this Review and finds encouraging the Central Bank's findings of significant improvements in the policies and practices employed by banks in support of their SME customers, including the following in particular that:
- banks are now focusing on improving their SME customer engagement and have made progress in developing quality SME plans;
- banks' SME marketing plans are of a good overall quality with evidence of regular communication with SME businesses;
- the amount and standard of formal business credit skills training and staffing is improving in banks along with the recognition of the need for further progress;
- banks are not reducing their lending standards in an effort to achieve particular lending targets;
- banks are actively and positively engaging with the independent Credit Review Process on SME credit appeals; or, where outside that particular process, applying the principles of the CRO process.
IBF also notes that these improvements are taking place at the same time as considerable manpower and other resources have been required to be devoted to managing the bank restructuring process, engaging with a more extensive regulatory approach and managing larger numbers of underperforming SME and personal portfolios.