Peter Mathews (Dublin South, Independent) | Oireachtas source

I am struck by several issues which may arise when SMEs go to the bank with business plans and I wonder what the bank does to address them. SMEs sometimes ask for too little finance as they think the bank will be resistant to the request, and under-pitch their requirements. The bank is developing and educating specialist teams, which is good, because if they see that the business they are examining requires more finance they will be able to tell the business it should increase its application. If a business falls short it will go on a journey but not arrive at its destination. It will be goosed. Template assessment will not tell one this. It requires teams of specialists who understand the business. The bank's development in this regard is good.

With regard to personal guarantees, where there is no equity up-front the finance should be limited and released as the business takes root. One can be flexible about these issues. Some finance can be provided up-front to get the commitment, and as years two, three and four progress the rest of the finance can be released. This is the way out.

The business expansion scheme, BES, is a very good way to get equity because it combines tax shielding for investors who want to support businesses recommended by lenders. If a bank has had a five-year relationship with a business which needs a second-stage injection of equity, the bank knows the business has been good for the first five years and that it has a future. However, as the bank is not an equity investor it should lobby the Government and state it should give BES breaks to investors who trust those businesses in the borrowing stables of the banks.

The bank might also consider providing extended periods of grace in respect of capital gains tax liability for SME start-ups or second-phase business. During the start-up and early stages of business people make huge sacrifices. It is unwise to apply too a high a level of capital gains tax liability where a business is being sold or merged.

The property recovery issue is currently in the chatter of the newspapers and airwaves. Allied Irish Bank is currently working on restoring its credibility. It is important to put paid to the speculation that there is a property bubble emerging. There is a small volume of transactions taking place in the context of the demand in the rental sector, which is leading people to think the property bubble is starting up again. We know that if the bank, in the context of restructuring its balance sheets, sticks to fractional reserving, this will not happen. It would not have happened previously if fractional reserving had been done by the banks. That is the tragedy of all of this. It is important to put paid to that nonsense.

The silence of leadership on the part of Government in this regard is, in my view, irresponsible. It might give people the impression that it is happy to accept that property prices have increased generally by 15% when in fact that is not the case and cannot be shown to be the case by a capitalisation of rental yields. The Government has a vested interest in this because if there is to be a recalibration of local property tax in 2016 and it can be proven that property prices have risen by 15%, this will be low-hanging fruit. The banks not engaged in the roll-up-sleeves work in which Allied Irish Bank is engaged on a case-by-case basis, including debt write-down, are questioning whether they should do anything if the underlying security has recovered a little. That is disingenuous. Do the witnesses-----