Bank of Ireland 'won't need more state aid'
Wednesday, 25 November 2009 13:08
Bank of Ireland says it will not require any more state aid, according to a five-year business plan it has submitted to authorities in Europe.
The bank also told a Joint Oireachtas Committee hearing on Finance and the Public Service today that it was committed to engaging with the National Asset Management Agency in order to support a functioning banking system, and aid economic recovery.
The bank's governor Pat Molloy, in his opening remarks, said that cash flow for businesses remains a problem and that SMEs continue to face significant trading difficulties.
He said that €2.1 billion has been drawn down by small and medium sized businesses (SMEs) in the first nine months of the year.
Fine Gael finance spokesman Richard Bruton said it was not credible to suggest that every business needing credit was getting it. Mr Molloy acknowledged that there was a mismatch between what politicians hear from their constituents and what the banks say.
Answering questions from the committee, Bank of Ireland's group CEO Richie Boucher said limits for overdrafts for SMEs had increased by 18%. He said the bank was working with Enterprise Ireland to 'improve our understanding of the sector'.
'We have a real task ahead of us to get across convincingly what we are doing for small business,' Mr Boucher added.
Mr Boucher also said BoI businesses outside of Ireland were being sold. He said their sale meant that it was not contradictory for the bank to say that it was capable of lending to business while shrinking its balance sheet.
Mr Boucher also said that while the money freed up by the NAMA process is important, the bank still needs to reduce its reliance on the Government guarantee. He said the liquidity situation six months ago was much more difficult that it is today.
He assured the committee that private residence mortgage holders have had every ECB rate passed on.
Mr Boucher said that the bank was assuming a 45% drop in house prices from their peak levels. He said the bank looked at loan to value rations when lending for mortgages, but the primary factor was its assessment of the ability to repay the loan.
'Corporate governance at AIB a priority'
AIB group chief executive Eugene Sheehy told the committee that competition is intense in the deposit market, and that the economics of the deposit side of banking 'is over'.
AIB chairman Dan O'Connor said corporate governance at the bank is a priority, and that his role as executive chairman is temporary. He said the process of hiring a chief risk officer and a chief financial officer from outside the bank is currently underway