Michael McNamara (Clare, Labour) | Oireachtas source

The witnesses talked about lending being one of the bank's most important functions and duties within the State. I received a communication from a constituent associated with an SME. Obviously, SME lending is crucial to the future of the State. The SME employs approximately 100 people so it is quite big by the standards of a rural constituency such as Clare. It is a well-known and long-standing family business. Through the most difficult years of the recession, the business kept all loans within contract, paying all on a full interest and capital basis without exception. Approximately 20% of the loans were in a two-year review programme. Owing to this, the business had a very good relationship with its local bank and decided that it would seek additional funding for capital investment. It was not a huge amount. It was less than 50% of what it was paying down every year. The business was a bit surprised when its file was transferred to the Financial Solutions Group in Dublin. The group is a section of the bank dedicated to supporting businesses and personal customers in financial difficulties. A well-known accountancy firm was appointed to carry out an IBR to support the application but that firm also specialises in receiverships. That was another slight concern but there were no difficulties with the bank whatsoever. The bank then started examining the two-year review programme and effectively threatened the company, which was perfectly functioning, that it would appoint a receiver if it did not accept new loan terms and conditions. This involved an increase of approximately 2% on the margin on the loans. Of course, the term was also pushed out to make it stack up on paper.

At this stage, the SME sought legal and financial advice, which was that it made no sense to sign up to the arrangement. However, it posed the question as to what alternatives existed? When a bank appoints a receiver to a perfectly viable company, it cannot remain perfectly viable for much longer because the receivership will have a considerable impact on its reputation and credibility. An SME employing 100 people might be a big fish in Clare but it is a tiny fish compared to AIB. The bank will spend as much money as it takes; that is what banks do. Does AIB prey on its successful SMEs to help fund those that are not successful? Is there a deliberate policy of doing that in the bank? We all know that successful mortgage holders, or those who are fortunate to be able to repay, are paying over the odds to pay for those who are not as fortunate and unable to repay and, of course, those who refuse to repay. Does this apply to SMEs?