Bank of Ireland in line to get €150m credit facility for small business loans

 

THE EUROPEAN Investment Bank (EIB) is in advanced talks to provide a credit line of some €150 million to Bank of Ireland for lending to small and medium-sized firms.

The initiative is similar in scope and scale to a €150 million EIB credit facility for AIB, which was agreed last December.

When lending this money on into the SME sector, the banks are obliged pass on preferential interest rates to their clients. The banks must also lend from their own resources a sum equal to the EIB-backed loan.

Together, the two schemes open potential for some €600 million in new SME loans.

Talks on a deal between the EIB and Bank of Ireland are ongoing and may soon reach their conclusion, said an EIB source.

The EIB is an EU institution which provides long-term project financing mainly for public-sector investment initiatives in the EU and enlargement countries.

The EIB, led since last month by former German foreign minister Werner Hoyer, does not lend a set amount per member state in any given period.

However, Mr Hoyer adopted a positive stance when asked yesterday whether there was a case to be made to increase lending to a country like Ireland, which is the beneficiary of an EU-IMF bailout.

“We should have a somewhat closer look at Ireland in these times,” he said.

Information released by the EIB yesterday at the publication of its annual report showed it signed contracts last year to lend a total of €475 million to Irish projects.

This included the AIB loan scheme, in addition to €235 million for the upgrade of Ireland’s electricity transmission and distribution networks and €90 million for a science centre, student accommodation and law school buildings at University College Dublin.

These contracts represented some 0.8 per cent of all EIB loan agreements last year and brought the value of Irish loans agreed in the 2007-2011 period to €2.53 billion, or 0.8 per cent of EIB lending, in those years.

EIB loans last year to Greece made up 1.6 per cent of its lending and loans to fellow bailout recipient Portugal represented 3.4 per cent.

The biggest loan recipient was Spain, which received €9.08 billion or 14.9 per cent of the total, and it was followed by Italy (€8.44 billion) and Germany (€6.11 billion).

Total EIB loan disbursements rose last year to €60 billion from €59 billion.

However, the value of signed loan contracts fell to €61 billion from €72 billion.