Sammy Wilson sets sights on banks

BELFAST BRIEFING:ARE BANKS in Northern Ireland using fire sales to force companies to get rid of distressed property assets?

The official line from the banks may be No but the Northern Ireland Minister for Finance is adamant that they are.

“It is happening,” Sammy Wilson says. “Banks are forcing businesses to sell property at the worst possible time and in turn banks are creating greater supply than there is demand, which is then forcing prices down further.”

The Minister says certain banks in Northern Ireland are “making a bad situation worse”.

“It is really hurting businesses that are otherwise healthy but that have a property element on their books.”

He says “Ulster Bank is the most aggressive” of all of the four key banks – Ulster, First Trust, Bank of Ireland and Northern Bank – that operate locally.

The Minister says the banking sector in the North generally is not in great shape and he believes that Ulster Bank is “the biggest contributor” to that problem.

Its solution, according to Wilson, is to force businesses that have “growth potential”, but which also have a distressed property asset on their books, to sell that property off, whether the business wants to or not.

Wilson says the local banking sector is suffering because Northern Ireland is missing out on initiatives that have been introduced by both Dublin and Westminster to encourage banks to lend to businesses.

“What we have found is that these initiatives are not working for Northern Ireland. For example Project Merlin [a UK government initiative with UK banks to lend £190 billion to businesses did not really work here and there has been no benefit from targets set by the Irish Government.

Wilson says that the cost and conditions banks are applying to credit are not helping healthy firms access the working capital and growth finance they need.

The Minister strongly believes that Northern Ireland firms are not blameless, and he highlights the decisions they freely made that have placed many of them in a difficult situation today.

But what he is particularly angry about is that the banks that were their partners not so long ago in what has emerged as ill-fated property ventures now appear to be abandoning them.

Wilson says the local banks are doing exactly what Nama said it would not do in Northern Ireland – cause fire sales.

“Nama is emerging as a paragon of virtue. It is not perfect – but its behaviour has been far more responsible in terms of the impact it has had on the Northern Ireland economy than some of the banks,” the Minister added.

But First Trust Bank says it is not in the business of selling at any cost. Brian Gillan, head of business banking, says: “Fire sales, by their nature, may generate short-term cash flow; however, they risk damaging value for all those involved in the property market whether owner, developer or banks.”

Gillan says its approach when dealing with business customers who may have a property portfolio that is dragging down an essentially solid firm is to review each one on an individual basis.

“As the core business can represent a route back to viability, all available options are explored and restructuring is agreed when viable and within our credit guidelines,” he says.

It sounds exactly what Wilson is advocating but the Minister is also determined to make sure that the Northern Ireland Executive steps in to plug the current “finance gap” for businesses in the North to ensure their survival, with or without the banks.

Wilson says NI Executive-supported schemes such as the Growth Loan Fund (a £50 million debt financing initiative which provides loans of between £50,000 to £500,000 to SMEs) and the Small Business Loan Fund (a £5 million debt financing initiative that will provide loans from £1,000 to £50,000 for small and micro-businesses) will play an essential role in creating a new finance lifeline for companies.

But he also intends to keep a close eye on banks in the North.

“It makes me quite angry about what they are doing and I have warned them privately that I will, if they continue, name them in the Assembly and expose the practices of some of them,” says Wilson.

Wilson says that certain banks in Northern Ireland are ‘making a bad situation worse’