I welcome any initiative that encourages a flow of credit to small and medium sized enterprises in this country. In this regard I very much welcome the establishment of the Strategic Banking Corporation of Ireland (SBCI).
At the same time I am concerned as to how effective this is likely to prove to be. The SBCI will initially make €800 Million available to Irish banks (and other TBD lenders) for onward lending to Irish SME’s. This fund has the potential to grow to €4Bn in time.
The problem is that in September the European Central Bank offered Irish banks €8Bn which was partially intended for providing cheap credit to Irish SME’s. The Irish Bank’s largely rejected this funding, despite the fact that at 0.15% it is likely to be significantly cheaper than anything the SBCI can offer.
Evidently the problem is not that Irish banks cannot access cheap liquidity. So what is the purpose of the SBCI?
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