Our country has been living with the unprecedented challenges posed by Covid-19 for almost two months now. In addition to the immense grief and health consequences being grappled with by many of our citizens, the economic, social and financial implications of this crisis are having a severe impact on households and businesses across the nation.
Much of the focus on the banking sector was initially directed at the practicalities of assisting people seeking breaks from mortgages and other loans in cases where their jobs or salaries were affected.
The Irish Banking Culture Board (IBCB) has welcomed the efforts that each of our five member banks has made to work collectively and with their industry body, the Banking and Payments Federation (BPFI), to come up with solutions quickly to help ease the financial burden on their customers.
Frontline bank staff have been dealing with a large volume of calls and contacts from customers seeking details and clarifications on the terms of the various solutions. Information shared by the banks through their websites, phone-lines and in branches is being updated regularly to provide clarifications and guidance.
As each week passes, the critical impact of the crisis on business is becoming increasingly evident. While it is unfortunately clear that there will be business failures arising from the impact of Covid-19, it is crucial that the SME sector is strongly supported as its survival will be key to rebooting the economy.
Over recent weeks this has been recognised by a range of influential voices in the banking sector, including the Central Bank of Ireland, individual banks, the BPFI and the Strategic Banking Corporation of Ireland.
So what is the role of the IBCB in this regard? In 2019 we undertook research that identified a need for more specific banking supports for SMEs and a particular need for banks to look at their approach to relationship building and communications with the sector.
Previously many SMEs relied upon their relationship with their local bank manager to facilitate their banking needs. With reduced branch networks and increasing use of online services, these relationships have changed significantly.
Small businesses told us that when they tried to access loans or financial advice, it was difficult to speak directly to someone with an understanding of the day-to-day realities of running a small business. Many SMEs were also not aware of the range of financing supports in place for them from banks and others, or how best to access these through, for example, the preparation of business plans to support credit applications.
We have been working on actions to address these issues with our member banks and board members including Sue O’Neill, who is also a council member of the Small Firms Association.
Throughout recent weeks, we have been contacted by SME representative bodies and individual businesses. Some have told us that the process of accessing certain supports from our member banks was proving difficult to navigate and the information required to support applications was not always readily available.
We have discussed these issues with the banks. They recognise the need to be flexible and have introduced measures such as issuing loan offer letters electronically, being mindful of cocooning business customers who cannot come into bank offices to sign documentation and having staff work over weekends to process requests quickly. We are encouraging them to continue to look at steps they can take to streamline and simplify the process.
More will be required, however, to ensure the survival of our SMEs. Banks certainly have a critical role to play, but lending alone will not be sufficient; grants and state guarantees must also be part of the supports offered, requiring the involvement of a wide range of stakeholders from government, business and the financial sector.
In that context, the IBCB welcomes the government announcement last Saturday of further measures to support businesses, in particular SMEs affected by Covid-19. The related report on capital and liquidity policy proposals for Irish SMEs, published by the BPFI on April 30 is also welcome.
The government measures look beyond lending supports, and include credit guarantees, three-month waivers on rates, deferrals of tax liabilities and cash grants. The new €250 million restart fund, focused on micro and small businesses, is particularly welcome given their importance in local communities across the country.
This multi-faceted approach, in which business, banks, other lenders such as Microfinance Ireland, and the public sector are working together to ensure the survival of our SME sector is essential. The establishment of an SME taskforce should be prioritised and it should look to learn from measures introduced in Britain, which has provided a 100 per cent guarantee on loans under £50,000, and elsewhere in the EU and beyond to support SMEs.
We acknowledge the measures our member banks have taken to date. We will continue to highlight the concerns we are hearing from stakeholders in the SME sector and will look to positively influence, as appropriate, the further support structures and facilities that will be needed in the weeks and months ahead as our country looks to rebuild.
Marion Kelly is chief executive of the Irish Banking Culture Board