“In terms of the pillar banks’ progress in achieving the 2012 targets, the information reported to my Department and the Credit Review Office (CRO) is commercially sensitive.” Minister for Finance, Michael Noonan responding to questioning in the Dail this week
So far, this State has injected €62.8bn into Irish banks. In addition, NAMA has paid the banks almost €5bn in state-aid when it took mostly-toxic loans off their books. In addition, a deputy governor of the Central Bank of Ireland, Financial Regulator Matthew Elderfield has recently said banks will need another €3-4bn of new capital in the next five to six years. In addition, Deutsche Bank has said that our banks will need another €5bn of capital imminently. Earlier this week, a review on here showed that the banks would need another €40bn of capital should the economy not recover, and should banks see their loans fall in value to “fair values” rather than the “carrying values” currently published in the financial statements of the banks. All in all, this country has put a massive amount of money into the banks, some would say the country has to a large extent damaged our future prospects to prop up the banks.
And what do we get in return? ATMs that still work. But we are also supposed to have a banking system which delivers credit to the economy, to households and businesses. In fact, so concerned were we that we imposed lending targets on the two so-called “Pillar Banks”, Bank of Ireland and AIB/EBS. The lending targets were for lending to the Small and Medium Enterprise (SME) sector only, no imposed targets for lending to households. The lending targets were for three years only 2011, 2012 and 2013. The targets were €3bn in 2011, €3.5bn in 2012 and €4bn in 2014 in total for both Pillar Banks.
So how are the banks doing?
On Tuesday in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked Minister for Finance, Michael Noonan for the performance of the banks in 2012. A fair question, you might think given that we are five months into the year. And the response? “It’s commercially sensitive”! No, seriously, that was the response, here is the full exchange (with emphasis added)
“Deputy Pearse Doherty: if he will set out any targets agreed by him with the pillar banks for lending to the domestic economy and to the small and medium enterprise sector in 2012; and the progress made in meeting these targets. [27959/12]
Minister for Finance, Michael Noonan: As the Deputy is aware, the banking system restructuring plan creates capacity for the two Pillar Banks, Bank of Ireland and AIB, to provide lending in excess of €30 billion in the period 2011-2014. SME and new mortgage lending for these banks is expected to be in the range of €16-20bn over this period. This lending capacity is incorporated into the banks’ deleveraging plans which allow for repayment of Central Bank funding through asset run-off and disposals over the period to 2013. The Government has imposed SME lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Both banks were required to sanction lending, including lending for working capital purposes, of at least €3 billion in 2011, €3.5 billion this year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved their 2011 targets.
In terms of the pillar banks’ progress in achieving the 2012 targets, the information reported to my Department and the Credit Review Office (CRO) is commercially sensitive. As such there is limited specific detail that can be divulged on the tracking of the banks’ performances. However, Head of the CRO John Trethowan notes in his eighth quarterly report that combined loan sanction levels in quarter one are broadly similar to the figures for quarter one last year. Lending transactions recorded by the two banks in quarter one are 15% lower than quarter one last year. He goes on to state that these numbers are a function of a number of variables:
(i) A softness in demand for lending reported by the banks, and observed by both the Mazars survey and recent Central Bank reporting:
(ii) Borrowers paying down debt rather than seeking new loans:
(iii) The tighter credit conditions in banks.”
In other words, banks which have drained 40% of GDP (so far) and which in return were required to offer basic credit levels to business (a) can’t have their lending figures divulged but (b) they appear below target anyway, partly because those banks have imposed “tighter credit conditions”
In a proper democracy – the UK – their banks have also been the recipients of state funding and in return, these banks are required to meet minimum lending targets. The UK even has a project name for the targeting of lending which is seen as vital in supporting the economy – it’s called Project Merlin. Both UK government, especially Minister Vince Cable and the Bank of England harry the banks to deliver on lending targets. Here? Not so much. We can’t even find out if the banks are meeting basic lending targets because of a bizarre interpretation of “commercial sensitivity”.
UPDATE: 6th August, 2012. AIB has reported that “AIB exceeded its SME lending target of €3bn in 2011 and is 17% ahead of its year to date target of €3.5bn for 2012” If AIB is ahead of target, then in light of Minister Noonan’s comments above about lending by both Pillar Banks being behind last year’s levels, an implication is that Bank of Ireland is way behind its targets. You might also wonder why Minister Noonan claimed this information was commercially sensitive given AIB’s willingness to make it public.