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Banks no longer using SBCI’s SME loan scheme

The country’s main banks have stopped using a State fund set up to channel low cost finance to SMEs, because lenders can access cheap money in their own right, the Irish Independent has learned.

The Strategic Banking Corporation of Ireland (SBCI) was set up to ensure favourable loan rates reached SMEs, by funnelling State-sourced money through the banks, who could then pass on the benefits. Irish SMEs pay some of the highest borrowing costs in Europe.

But SBCI chairman Conor O’Kelly – also chief executive of the National Treasury Management Agency – said banks were bypassing the SBCI because they have access to low interest rates on the open market.

The comments are contained in a letter to Finance Minister Paschal Donohoe and released under Freedom of Information rules.

“We have previously reported that the prevailing low interest rate environment has diminished the SBCI’s financial advantage for banks,” the letter states.

“This has been evident of late among the SBCI’s bank on-lenders, as Bank of Ireland has prepaid €50m of its loan facility, and Allied Irish Banks and Ulster Bank have fully deployed their facilities and are not seeking further loan facilities at present,” Mr O’Kelly’s letter says.

The SBCI also has a number on non-bank entities on board to take money and pass it on. The letter, dated September 22 of last year, said the SBCI was “committed to developing its pipeline of non-bank on-lenders to continue driving choice for SMEs”. However it has not secured a new on-lender since November of 2016.

Initially the lenders were responsible for repaying the SBCI, but the State body then went on to develop so-called “risk-sharing” products, where it is also on the hook if loans go bad.

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