Mr. Mark Fielding:

I thank Deputy Peadar Tóibín for his questions. In regard to small and medium-sized businesses being in distress, speaking in Tralee last year, Ms Malone from the Central Bank mentioned SME lending of €57 billion, while the word "distress" was used in the same sentence. Of the €57 billion loaned to SMEs, about €32 billion is construction and development related and about €25 billion is normal SME lending, for want of a better expression.

We all know the difficulties in the construction and development sector, but let us consider the €25 billion figure associated with it. I imagine the norm for distressed figures is somewhere in the region of 30%. I am referring to what the banks would regard as in being distress, in other words, beyond 90 days due.

Reference was made to the banks working with SMEs. There was a major issue when this problem arose initially in late 2008 in the case of small businesses which were keen to be sorted out, having overextended during the heady days of 2004, when credit was being thrown at them like snuff at a wake. They could not find people within the banks to talk to them because the expertise was not available. We took numerous calls on the Irish Small and Medium Enterprises Association's helpline from people involved in SMEs who expressed frustration and asked where they could get someone to talk to them at that level. That persisted for a long time. Certainly the banks have now started to do far more and there is less of the pretend-and-extend than in the past. In fact, it was mainly pretending, rather than extending. We have found that, in the main, the banks are grappling well with the debt overhang. The difficulty was in trying to separate the non-core assets on the balance sheet of a business from the others. They were non-core, but they were non-performing. The difficulty was in finding a way to deal with the core business that was, perhaps, employing 15 or 20 people and that was feasible, albeit vulnerable for several reasons. One of the reasons was the over-extension on borrowings, but such businesses were also vulnerable because of the economic situation in which we ended up. It was something of a struggle to get the banks to get their heads around the fact that the lending was not part of the core business, as such, and that a given portion would have to be warehoused or have something else done with it. That is happening, although I cannot honestly tell the Deputy how fast it is going. I must accept what the banks state about the number of people they have put into that area. Initially it was slow, but they are certainly working on it.

Reference was made to Government initiatives and the Credit Review Office, in particular, but the figures are rather small. The Deputy is correct to suggest it is difficult to get businesses to bring their cases to the CRO. There is a certain fatigue also in that a person running a firm may go to a bank and eventually receive a refusal. I say "eventually" because I have seen the list of excuses used by the banks about which we have heard from our members. One of the major excuses is constructive refusal in the sense that the banks simply drag out the decision until the need for the funding is nearly gone. That is taking place with the internal appeals procedures in the banks and then firms come back and start again and have to go through another appeals procedure. All of this is rather difficult for small and medium businesses.

The credit guarantee scheme was simply not being mentioned by the banks in many cases. The idea was that the bank would bring a firm to the credit guarantee scheme; it was not for the SME to ask for this. If a business was refused on the grounds of collateral, the bank was supposed to follow that route. We found that many of the banks did not do so because it involved increasing their exposure to the SME in question. That was another difficulty.

Recently, we made a submission to the Department of Finance on the employment investment incentive and seed capital schemes in an attempt to make them far more user-friendly, especially for small and medium-sized businesses. A large business can use the seed capital scheme easily, but smaller businesses have been finding it rather difficult to do so.

Reference was made to the cost of credit. I will be shot for saying this, but it is not a big issue. The reason it is not a big issue is that many SMEs remember a time when the cost of credit was 19% or 20% and they were still able to get by because that is what a business does. It is simply another cost. Having said that, let us compare the cost of credit in Ireland for SMEs as against that for large businesses. The gap is expanding year on year. Each year we see the gap in the cost of credit to a large business as against a small business extending. Let us consider the cost of credit in Ireland for SMEs as against the cost of credit for SMEs throughout Europe. Again, the gap is increasing all the time. That remains an issue for us. Another problem is that there are so few banks which meant that there is not as much competition as we would like because of the exit of many banks.