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ALLIED IRISH BANK has written down over €2 billion worth of outstanding debt owed by Small and Medium Enterprises over the past 12 months.
AIB head of financial solutions Brendan O’Connor told the Oireachtas Committee on jobs, enterprise and innovation today that the bank has been rolling out a strategy which aims to determine the amount of sustainable debt a company can carry.
“In the last 12 months alone we have approved over €2 billion worth of compromise,” he told the cross-party group this afternoon.
Responding to questions from the committee as to whether the €2 billion equates to a write down, he replied: “That’s a write down, yes.”
He continued:
Practically speaking, our approach is no different to what it is on mortgages, where we have assessed that the debt cannot be repaid or can never be repaid, we are prepared to compromise on that debt.
€15 billion debt pile
AIB director of personal and business banking Bernard Byrne said that the bank had approximately 9,000 SME borrowers in difficulties with around €15 billion in debt attached to them.
O’Connor later said that around 25 per cent of this number has completed a debt restructuring process, with another 40 per cent now in the negotiation process.
He said: “I would hope that we would have the back broken on this before the end of 2014.”
He continued: “A debt compromise is a write down, yes…we’ve approved it for close to 1,500 or so of those.”
He said that agreements were subject to performance on the remaining part of the “sustainable debt”, but that customers would know that if they hit targets on the sustainable portion of the debt then a solution is available.
He said that the solution was born of the need to disentangle non-core debt that may be linked to a company.
“Most typically the borrowers in Ireland…borrow in their own name so you frequently have assets that are entangled…it is our core strategy to disentangle the non-core debt and to disentangle that over time.”
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Typo in the headline. Should read “Taxpayer has written off 2 billion of SME debt”
The SME’s moan a lot that they can’t get credit, but they don’t seem to be too good at paying back what they owe.
If I was a bank I wouldn’t lend to them either. Let them bootstrap themselves and generate their own cash or capital to fund their business if it makes any commercial sense.
You obviously have never been involved in a business or never will be.
Every economy lives or dies on SME’s.
We could survive without Multi-nationals, brutal as that would be.
An economy is completely gone if SME go.
You proposal above would make turn Ireland in to one of the poorest countries in the world in a decade. They do not even do that in Africa.
A lot of SME’s do not help themselves… No / poor grasp of financials, cash businesses not lodging full turnover to bank accounts, others blatantly admitting to tax evasion and so on. We need smarter business people in this country not have a go heros. All of the above comes from my sources in the industry… I have no reason not to disbelieve them.
Truth be told it isnt written off the taxpayers have paid for it.
On the paper today how much it cost the Irish taxpayer to write off mick wallace’s Aib debt. No mention on the journal yet. Even though every time he gives a speech from his moral high ground, the journal are quick to post it.
All they are doing is recognising bad debt as bad debt by converting provisions to write offs. The cost to the Bank (or taxpayer) was taken long ago.
This is normal business practice. That is was not normal prior is a testimony to the old fashioned ways our banks were run, to great cost..
Normally the State does not use tax payers money to directly fund private enterprise.
So no, Seanie, it is not normal business practice.
Business once again gets a bail out while the unfortunate house holder in difficulty gets stuffed by government and the banks……
Kerry
Let’s sign up to your highly intelligent brand of economics. Let’s insist that the Banks pay a dividend of circa three thousand Euro per household at the end of the year and tell them to just write it off their balance sheets.
I really look forward to your fascinating contributions.
They’re at least good for a guffaw…….no wonder you don’t use your real name!
So you disagree the SME’s are being treated differently to house holders Richard? I’d argue with you but seeing as your grasp of reality and what is happening to ordinary Irish citizens is so vague there is no point. By the way I don’t see any reference by me to economic policy in what I said above just a statement of fact. But hey Richard if your happy with peoples family life being destroyed by financial stress that’s fine your welcome to what ever floats your boat.
“Stephen Mason, Director of BOI’s mortgage arrears resolution strategy, admitted that the bank would veto any Personal Insolvency Practitioner suggestions of debt write-down”, but its ok for them to pay 1% of first time buyers stamp duty. There needs to be consistency across the banks when dealing with problem debt. Whats good for the goose is good for the gander or do you propose that we recognise some peoples debt as less valid than others? The dotted line was signed, why should business owners benefit where others do not?
Kerry
You can call Richard a few names too ;)
The other equally lovable Richie ( Boucher ) will only do write-off’s on unsecured debt , and not secured debt ( mortgage) unless the person is successful through Personal Insolvency ( which is highly unlikely since the bank has 65% veto power ) or bankruptcy !
AIB ,on the other hand ,have been writing off debt for home-owners and now SME’s !
Kerry remember that small business owners have families too and no dole should the business fail. They employ employees who are family members to someone’s family. I am a small business owner, very small and crippled with debt. That debt was perfectly manageable 5 or 6 years ago, when you had money to spend, but now I can see now way out, but all I can do is keep trying. Don’t assume every business has money -some like mine have none, and all my debt is (as a sole trader) personal
I’ve lots of sympathy for you and people in your position Ian all I was doing is pointing out the different standards….
Good old tax payer bailing everybody out….we should get a medal. Who is going to bail us out when we are bled dry bailing everybody else???
2 billion divided by 1,500 SME’s = 1.333million written off to each company….
Some SME’s they are….
More like their mates got the write down first
Normal person owes a couple of grand and they have the solicitors letters out..
Was going to post that myself. Bank managers friends etc will get there piece first, keep them in a life there accustomed to. But keep the little man down.
Why does it matter? Either way SME’s are getting debt reductions…
How much did the AIB shareholders lose because of greed and bad management?
have your say