Banks Reject €6.4Bn Opportunity to Lend To Irish SMEs

It is concerning to see that Irish banks appear to have passed up on the opportunity to avail of the full €8Bn in cheap funding offered by the European Central Bank for onward lending to individuals and businesses within the Irish economy. Of particular concern is the demand for credit from viable SME’s that is very obviously not being met by lending institutions. The ECB’s €400Bn four year liquidity programme announced in June became available for draw down yesterday, Ireland’s share of this fund has been estimated at approximately €8Bn. The mechanism of this TLTRO programme is that member state banks can avail of a portion (7%) of their qualifying loan books on the condition that these funds are loaned on to Businesses (excl. financial intermediaries & mortgages) and Consumers (excl mortgages). There is no breakdown available of the actual amount of this funding drawn down by the qualifying Irish banks but early estimates put it at around 20% of their entitlement, this means that 80% or €6.4Bn of funding at 0.15% was not availed of. The problem arises during phase 2 of this TLTRO scheme, this is set to be significantly greater than the original €400Bn, any funding offered by the ECB under phase 2 will be a multiple of net new lending created by the application of phase 1. The upshot is that by not fully availing of this scheme Irish banks are not only denying immediate access to cheap credit by Irish business but they are also hampering the future competitiveness of Irish companies by shunning the opportunity to significant cheap funding in the future. There will be a second and final offering of phase...

Rent Controls are Short Sighted

There is a critical need to address the housing shortage in the Dublin area. Private and public sector building programmes must be encouraged in order to meet the growing demand for homes. Rents will stabilise, and potentially fall, once there is a marked increase in the housing supply. The accepted problem with rent controls is that they restrict the supply of housing. House builders and potential landlords are discouraged from investing in property due to the artificial cap placed on returns. Evidence from Abroad Sweden is a case in point. Rent controls have directly contributed to a housing crisis. Due to a fall off in development in the years following the introduction of rent controls a shortage of 40,000 units has arisen, mainly concentrated around major cities. Germany’s complex ‘Mietspiegal’ system is often cited as a success, however this must be viewed in the context of a falling population. The German government has acknowledged that a proposed tightening of this system will only succeed if done in conjunction with new tax incentives for home builders, this is because they are well aware of the effects rent controls have on supply. Ireland has a housing supply crisis, policies that further limit supply are short-sighted....