THE CREDIT REVIEWER has criticised the country’s two largest banks for not showing enough ‘enterprise risk-taking’ in lending to small businesses.

In his eighth quarterly report, John Trethowan said he was disappointed that there was not more evidence to show that AIB and Bank of Ireland were lending at a rate that could contribute to economic recovery.

Trethowan noted, however, that the two banks have a combined target for sanctioning €3.5 billion in loans in 2012, an increase of €1 billion on 2011 – and said the two banks were largely supportive of medium and low-risk

“I observe that the two pillar banks are largely being supportive of medium and low risk new lending proposals from well established SMEs and farms which already bank with them,” he said.

The Credit Review Office offers an independent review of decisions by the two ‘pillar’ banks to refuse credit applications to small businesses and farms, and says it has received 44 appeals in the last three months.

Of the cases completed in the last quarter, the office overturned 17 loan refusals, which resulted in the banks lending a further €2 million which the office says supported 140 jobs in the SME sector.

‘Economic conditions’

The office has received 197 appeals in its two years of existence, and of those which have been completed, 69 loan refusals have been overturned – releasing €6.9 million of credit – while 48 have been upheld in the banks’ favour.

This morning’s report also included a number of testimonials from businesses who had used the office’s service, including the operator of one gastropub in Dublin 2 which the owner says is thriving.

“The bank did not want to lend to pubs or restaurants. However we believed there was a gap in the market in Dublin 2 [...] We would not have got the business started without the help of the Credit Review Office,” its proprietor said.

AIB this morning said it understood the importance of lending in stimulating economic recovery, but added that demand for credit remained low “as a consequence of economic conditions”.

Its head of business banking, John Webb, said the bank wanted its customers “to approach our branches and Commercial Centres to discuss their requirements. This will allow us to help them make formal credit applications”.

Read: The Credit Review Office’s quarterly report in full (PDF)

Read Me: Households aren’t the only ones hit by negative equity – it’s crippling businesses