# Who do you believe - small businesses or our "truthful" Irish banks?



## onq (24 May 2011)

Who do you believe - small businesses or our "truthful" Irish banks? I find the current situation deplorable, with Banks still saying that the problem is a lack of viable businesses, while the economy is in the middle of a recession which their profligate lending practices led to. The size of an economy relates directly to the amount of economic transactions going on in that economy. Businesses have been screwed by upwards-only rent reviews and outrageous retail prices for years. Now we find that banks are still hiding behind the "viable business only" fig leaf - years after their profligate lending policies led us into this recession. Its time for this otherwise impotent government to stop wrining its collective hands and give the banks a kick up their collective backsides -  or replace them with a commercial lending bank. What other country would allow bondholders to escape penalty, pump money into zombie banks to recapitalise them, and stand idly by while they refuse to lend to businesses?

[broken link removed]


----------



## T McGibney (24 May 2011)

The brutal truth is that the business environment in Ireland is now extremely hostile to small businesses. As a result, many businesses that would normally be viable are no longer viable. 

Banks have no reluctance in lending to businesses when they are confident that they can get their money back. The absence of this confidence is merely a symptom of the mess that the country is now in.  The problem is much more complicated and serious than the 'evil bankers' scenario that you have projected in your post.


----------



## Sunny (24 May 2011)

onq said:


> What other country would allow bondholders to escape penalty, pump money into zombie banks to recapitalise them, and stand idly by while they refuse to lend to businesses?


 
What Country hasn't?


----------



## onq (24 May 2011)

Here is the thing.

All businesses, viable or otherwise, need access to capital.
The size of an economy depends on the numbers of transactions occuring at all levels.
Merely taking tax from multinationals located here for tax purposes isn't growing the economy.

We need jobs.
We need indigenous businesses.
The banks are pursuing a self-fulfulling prophecy.
And where, pray tell, is the risk that justifies the profits the Banks make??!!

Profit is the reward for enterprise, which takes risks.
I don't see any banks taking any risks - yet we're supporting them AS IF THEY ARE SUPPORTING US!!!

I see too many smug people in jobs mputhing platitudes these days about the banks "new" lending policy.

Banks for years held the Irish ecomomy back.
I the nineties realised that there was a balanced risk to be taken whereby some of the businesses they lent to would go under and they would take a hit yet more would prosper and they would make money overall.

They went from banks being like a priest in a confessional to actually lending using sound principles.
But then Anglo joined the scene and they went from lending money to selling money, as a neighbour of mine who works in the bank said recently.
I pointed out that later they went from lending to shovelling cheap internationally financed money into a relatively small, open economy and overheated it.

He had no answer and its teh same people who lent that money who control the IMF and set the terms of our bail out - anyone seeing a patter here?

Now the economy is on its needs and we need start up finance for risk takers - where are the banks now?

Licking their wounds delivered by public approbium for unwise over-the-top lending policies, that's where.
Thay are in general not fulfulling their economic structural function of providing access to finance.

Yes, some businesses will fail  - that was a given in the 'Nineties and even in the 'Noughties.
But what's all this hand wringing replies I see in this thread? So what if some fail?
They won't ALL fail - some will prosper!

And a successful growing economy has more prospering businesses than failing businesses - that's the capitalist dream.

But with the banks dysfinctional in their lending practices at the moment, opportunities to succeed are being denied access to finance.
The banks are holding us back in this recovery.
The will and the ideas are out there.
The banks are missing!

Is Féider Linn?

Certainly, but not with these lily-livered dysfunctional banks!

ONQ.


----------



## T McGibney (24 May 2011)

I think you're missing the point. There is a chicken and egg situation here. But its not the evil banks refusing to lend to Irish businesses.

Until the Irish business environment improves, Irish businesses will suffer and fail, and money lent to them or invested in them will be lost. There is zero political will to improve the business environment. The regulatory burden and cost base are pretty much at the same levels as pertained at the height of the bubble. 

There has been no serious attempt to address these imbalances, and the few baby steps made in that direction have been stymied - take for example the recent reversal of the previous minimum wage cut.  Even now, after three years of economic depression, politicians are afraid to propose the relaxation or abandonment of any aspect of State regulation, for fear of being labelled 'neo-liberal' or 'Thatcherite'

Just because the banks wasted billions on the property market doesnt mean that they should now make the same mistakes all over again in relation to SME funding.


----------



## Sunny (24 May 2011)

That report shows that lack of finance is only number 6 or 7 in a list of problems for SME's. Labour costs, utility costs and regulatory costs were all bigger concerns and yet there is no publicity about that. Banks are an easy target.


----------



## JoeB (24 May 2011)

Sunny said:


> What Country hasn't?


(in relation to burning bondholders, and protectionism of 'important people and companies')

America, where big banks were allowed to go to the wall, firesales of assets took place, and disgraced CEO are now languishing in prison. Seems like a different world alright.

The Americans are very strict, but they apply their rules. Ireland is the opposite, where rules are ignored. ireland is back up in an EU court shortly for our governments incompetence stretching over ten years., and Gov.ie ignoring a EU court order. (over septic tanks)


Incidentally, of course the Gov.ie was wrong to re-capatilise the banks. Why are the Gov in discussions with banks that they own? Why not use their voting rights, as majority shareholders, to remove the board and replace them... with puppets, if that's what they want. International credibility is shot to hell anyway..

I don't agree that private companies should be forced to lend to anyone (or be in receipt of any taxpayer money),.. if the government wants to lend money let them do so.

Does anyone remember 'systemic failure' and 'too big to fail'.. so where are we now.. creating a supposedly stable banking system based on two pillar banks.. the very same banks that created the mess, with mostly the same staff. Seems pathetic to me, and we're doomed to repeat our mistakes. I recently told some bank staff to 'f*** off'... as they gave me three answers to a question, and there were only two people on the Customer Service desk. When I complained about the multiplicity of answers they thought I was a weirdo, .. for complaining about getting more answers then there were people to give answers ... so I said what I said and walked out of the bank.. muppets. Absolutely unprofessional in my view.


----------



## csirl (24 May 2011)

The Irish banks are all in difficulties so I would understand why SMEs cannot get loans from them. Are SMEs succeeding in getting loans from foreign banks? Are the Irish banks out of step due to their circumstances or is it a case that the worldwide banking community has decided that any lending to SMEs in Ireland is too risky? If it is only the Irish banks, why arent SMEs going to foreign owned banks for loans?


----------



## Sunny (24 May 2011)

JoeBallantin said:


> (in relation to burning bondholders, and protectionism of 'important people and companies')
> 
> America, where big banks were allowed to go to the wall, firesales of assets took place, and disgraced CEO are now languishing in prison. Seems like a different world alright.


 
America where AIG, Freddie Mae and Freddie Mac were saved because of taxpayers money? America where Citigroup was bailed out? America that helped Bank of America with the losses when it took over Merrill Lynch? America that provided unlimited liquidity to it's banking sector. America that bailed out General Motors and Chrysler?


----------



## Sunny (24 May 2011)

JoeBallantin said:


> . I recently told some bank staff to 'f*** off'... as they gave me three answers to a question, and there were only two people on the Customer Service desk. When I complained about the multiplicity of answers they thought I was a weirdo, .. for complaining about getting more answers then there were people to give answers ... so I said what I said and walked out of the bank.. muppets. Absolutely unprofessional in my view.


 
Yes, because telling low ranking bank staff to f*** off makes you sound like a lovely person to deal with


----------



## JoeB (24 May 2011)

I don't claim to be a lovely person,.. but then I'm not employed by the bank and don't have standards to uphold.

I think it's wrong that professional banking staff, on a customer service desk, give three answers between two people... the problem was their unprofessionalism, .. they deserve what they got. They clearly believe that bank staff deserve respect, regardless of how they perform, or don't perform.

If they don't know an answer to a question they should say so, not make up incorrect answers. So they told me to F off first, in everything but the words.

I presume they had a customer charter which they were in breach of... that's not my fault. Why should I suffer fools gladly? If they were in training they should have said so, but they didn't and weren't.

This is how they normally respond to queries, by making up answers. They were surprised when I questioned them on the fake answers, and immediately made up new answers. Totally silly in my view, and their behaviour would be disowned by management, I'm confident of that.


----------



## Firefly (24 May 2011)

Hi ONQ,

it must be very frustrating as an SME to see that despite all the money we've put into our banks that credit is not flowing into the sector that produces the most wealth for this country. Having said that, I think the banks are in a bit of a bind...the last thing they want to have to do is defend is why they threw good money after bad if things go wrong. We are in an open, free market where any foreign bank can open up shop tomorrow to fill this market if they wish, but they are not doing so. We have to ask why this is the case. Are there too few viable businesses to lend to to make it worth their while? A number of foreign owned banks actually pulled out of Ireland and the only ones left are there to pull in nervous depositors. 

Also, you'd have to ask yourself if you were in charge of the purse strings in one of the banks would you be willing to lend in this stage of a recession? Even though it might be the "right" thing to do it may not be the best thing to do financially. 

IMO there are plenty businesses out there that need to fail...the types of businesses that could only ever survive in a celtic tiger boom. It's going to be back to basics for a lot of other businesses with a focus on less borrowings up front.


----------



## Chris (24 May 2011)

onq said:


> And where, pray tell, is the risk that justifies the profits the Banks make??!!


What profits? Irish banks have been making nothing but losses!



Sunny said:


> America where AIG, Freddie Mae and Freddie Mac were saved because of taxpayers money? America where Citigroup was bailed out? America that helped Bank of America with the losses when it took over Merrill Lynch? America that provided unlimited liquidity to it's banking sector. America that bailed out General Motors and Chrysler?


I was thinking the exact same thing. If anything the US is a poster boy of bail outs on steroids.


----------



## JoeB (24 May 2011)

I think foreign banks weigh up the pros and cons of operating in Ireland, and decide not to.

The reasons for this, in my opinion, is partly the banana-nis of our country.. with secret bailouts, and golden circles, and business on the golf course, ignoring of data Protection laws, ignoring other laws (just ask me), and the idea that all companies break certain laws.

Reputable foreign banks probably say 'not worth it', whose palms do we have to grease etc, we'll just stay away'

I've always said this was a danger of light touch regulation.

For example, COMREG happily publish documents stating that all telecommunications companies operating in Ireland have been breaking  European law since 2003. Does that incentivise foreign entrants into the market? They see a market with a 100% level of lawbreaking, and they decide to open shop in another country, rather than either observe the law, and dis-advantage themselves against all other operators, or break the law themselves.. that's not much of a choice for reputable companies, so they stay away. (Minister Eamon Ryan did nothing about this throughout his entire term, I'm glad his party were decimated, as they were mouthpieces only)
(should decimated be six-inated?)


If we had a decent country, where the rules applied to everyone and were enforced, then things would be different. People looking in from outside see a banana republic, with a 'golden circle' class, and they stay away, as they know they're not in the club, and they will be disadvantaged.


----------



## Mpsox (24 May 2011)

Is it not possible to believe both,? ie, are the banks correct in what they are saying that a lot of the businesses looking for money are not viable (answer, probably yes), and that a lot of actual viable business are not being lent to by the banks (again, probably yes)


----------



## Sunny (24 May 2011)

Mpsox said:


> Is it not possible to believe both,? ie, are the banks correct in what they are saying that a lot of the businesses looking for money are not viable (answer, probably yes), and that a lot of actual viable business are not being lent to by the banks (again, probably yes)


 
Course it is but that doesn't sell newspapers.


----------



## Jim2007 (24 May 2011)

JoeBallantin said:


> America, where big banks were allowed to go to the wall, firesales of assets took place, and disgraced CEO are now languishing in prison. Seems like a different world alright.



Which banks and CEOs are you talking about?  To the best of my knowledge only one bank went to the wall and once the US Gov. saw the consequences they moved very quickly to shore up the banks, even Swiss banks!!!   And I can't think of a single CEO that went to jail, in fact most of them walked away with very nice bonuses thank you very much!!!

Jim.


----------



## Jim2007 (24 May 2011)

onq said:


> All businesses, viable or otherwise, need access to capital.
> 
> Banks for years held the Irish ecomomy back.
> 
> ...



Did I miss something? Where is all this cash the banks are supposed to beholding back from SMEs???  If the banks had such cash balances available then they would not need to be call on the ECB for liquidity in the first place!  The reality is that the banks are just about managing to meet their liquidity requirements at present, so the idea that they can suddenly start pumping money in to a whole lot of doubtful SMEs is just fantasy!

Good luck with that,

Jim.


----------



## JoeB (25 May 2011)

OK, perhaps I was wrong about the US, who are the bailout kings. Didn't Bear Sterns go to the wall though?

I feel Irish bankers would find themselves in court if they did what they did In ireland in the US instead. Didn't Irish bankers cook the books and lie to our government?

Would Ireland have arrested the head of the IMF? I doubt it. Would an Irish court issue a summons for the pope to appear in court in relation to child abuse? Again I doubt it. But the US are prepared to do just that, while our politicions procrastinate. Totally off the point of course, but there is a perception here that senior members of 'society' will never see a courtroom, or a prison cell, regardless of what they do. Our government is too cowardly to even withdraw a bonus, and force the disgraced CEO to come to court looking for them, if they dare.


----------



## onq (25 May 2011)

Firefly said:


> Hi ONQ,
> 
> it must be very frustrating as an SME to see that despite all the money we've put into our banks that credit is not flowing into the sector that produces the most wealth for this country. Having said that, I think the banks are in a bit of a bind...the last thing they want to have to do is defend is why they threw good money after bad if things go wrong. We are in an open, free market where any foreign bank can open up shop tomorrow to fill this market if they wish, but they are not doing so. We have to ask why this is the case. Are there too few viable businesses to lend to to make it worth their while? A number of foreign owned banks actually pulled out of Ireland and the only ones left are there to pull in nervous depositors.
> 
> ...




Hi Firefly,

You have no idea how frustrating it is.

Our big problem nationally is the public service wage bill and the cost of our health care - but tax from public servants help pay our way - we cannot simply "et them all go!"

I agree a major problem with small businesses may be labour costs, but the problem for a worker is the cost of living.

I agree that the banks are easy targets and that in and of itself this may be distracting us from an even bigger picture - the profits currently being made by landlords and retailers on the back of an economy in recession.

You could add to this the criminals who simply haven't paid people what their owed, and those more unfortunate who cannot pay because of their own misfortune financially.

But to back to my original point, I am not even talking about large business loans - I am talking about loans in the €20K-€300K that would allow persons who are in stable well paid employment to improve their home, buil a new home or upgrade their business premises.

Relatively small, low risk amounts when measured against turnover and annual profits, but they are amounts which they cannot produce at the moment.

I don't know why foreign banks aren't coming in here to offer to provide and service these loans - perhaps another poster could assist.

All i know is that people who would under any circumstances be considered "good risks" are not getting loans.

This practice is holding back this nation from recovering.

That's very hard to accept.

ONQ.


----------



## Firefly (26 May 2011)

onq said:


> Hi Firefly,
> 
> You have no idea how frustrating it is.
> ONQ.




Hi ONQ,

I'll try and give my tuppence worth to the points you have raised.

You're right. Luckily for me the business capital my company needs amounts to a new laptop every 2 years.



onq said:


> Our big problem nationally is the public service wage bill and the cost of our health care - but tax from public servants help pay our way - we cannot simply "et them all go!"
> ONQ.



Yes the public sector pay bill needs to come down further to balance the budget deficit, but I think bailing out the banks has hit us a lot harder. That is afterall why we needed the bailout from the ECB/IMF. Had the banks not needed to be bailed out (even with the budget deficit situation) we'd still be all right.



onq said:


> I agree that the banks are easy targets and that in and of itself this may be distracting us from an even bigger picture - the profits currently being made by landlords and retailers on the back of an economy in recession.
> ONQ.


I'm not sure many retailers are making profits and if they are surely that's a good thing? As for the landlords...they can cling to their upward only rent reviews but if a tenant walks then the next tenant will be paying a lot less so I'd expect an aweful lot of deals are being done here. 



onq said:


> You could add to this the criminals who simply haven't paid people what their owed, and those more unfortunate who cannot pay because of their own misfortune financially.
> ONQ.



I'm not sure what you are referring to here and why it's relevant to your argument



onq said:


> But to back to my original point, I am not even talking about large business loans - I am talking about loans in the €20K-€300K that would allow persons who are in stable well paid employment to improve their home, buil a new home or upgrade their business premises.
> 
> Relatively small, low risk amounts when measured against turnover and annual profits, but they are amounts which they cannot produce at the moment.
> 
> ...



I can't speak from a business perspective, but in the private market I'm not sure if there's much demand for finance at all (I could be wrong). I think most people are worried about the future and are building deposits rather than seeking loans for house improvements. I personally think it will stay like this until well into next year. If we get a break from the ECB/IMF and there's more stability then people (with larger deposits) will start spending again..but nothing like the "good years".


----------



## Jim2007 (26 May 2011)

onq said:


> I don't know why foreign banks aren't coming in here to offer to provide and service these loans - perhaps another poster could assist.
> 
> All i know is that people who would under any circumstances be considered "good risks" are not getting loans.



Well speaking as someone involved in the finance sector here in Switzerland I can say that our banks are not in habit of give out these kind of loans, especially to people who are already financially stretched.  The typical Swiss bank makes most of it's income from asset management, not lending out money.

Here is how it goes over here - home ownership is below 60%, which is typical for middle Europe I think.  To get a mortgage you need to have 30% of the market value of the property in hard cash and you can borrow no more than 2.5 times the salary of the principal income earner in the family.  No right minded Swiss would ever consider borrowing  money for home improvements, if he has not got the cash he would save up until he had and only then would he go ahead with the work.  This is typical of middle Europe as far as I can see.

So the idea of say a Swiss bank setting up Irish branches to start lending out money would not fly, the shareholders would assume that the CEO has gone mad!

You must realise that most middle European banks to do not give out money as easily as Irish or UK banks.  Over drafts are rear and credit card balances are normally expected to be paid off in full each month.


Jim.


----------



## Jim2007 (26 May 2011)

onq said:


> This practice is holding back this nation from recovering.
> 
> That's very hard to accept.
> 
> ONQ.



What do you mean by recovery?  If you mean the building industry and I have a feeling you do, then I think you will have a very long wait!  The building industry growth was a bubble fuelled by cheap money, rather than wealth generating in terms of foreign income.

The recovery when it comes will have to be export driven and consist of true value added activities only when that is well established can you expect to see things like the building industry pick up again.

Jim.


----------



## Chris (27 May 2011)

I agree with everything Jim has posted. It goes to show how flawed the US/Irish/UK idea of building an economic foundation on credit fueled consumption is. Those countries where people have the strongest attitude towards savings are the countries that are in the least amount of trouble.

To add to the example of bank's and people's attitudes towards loans on the continent I can sum up the difference between Ireland and Germany as follows: when someone wants to buy a car in Ireland they go to the bank to look for a loan; in Germany someone that wants to buy a car goes to the bank to get a savings account.

Ireland's problems are due to too much credit fueled spending and investment. Increasing that further will only make things worse. The unfortunate thing is that there are too many businesses that should never have come into existence and a lot of them will have to close down. And entrepreneurs will have to come up with more of their own savings in order to set up businesses that are smaller than they would like. The last thing this country needs now is more credit.


----------

