The validity of your broader point notwithstanding, how does the anecdotal evidence to which you refer, such as that produced by ISME, tally with the remarkably low level of appeals?

PWC, the DoF, the NTMA and all the banks in Ireland couldn’t give a true picture of their loan book over the last 1.75 years. How can we have any confidence that we are being given a tru picture of credit availability, particularly when it goes against all anecdotal evidence.

Mr. Trethowen “found no evidence”? Did he find anything at all?

Hopefully you’re right & we will get some colour on the breakdown between net new lending & old loans being paid down.

I’ve gone through 30 years worth of PSC figures and made some (possibly tenuous) assumptions about Residential Mortgages e.g. 20 to 25-year repayment loans taken out in the 1980s & 1990s, making further assumptions about the number of new mortgages each year (as a % of total housing stock as well as new build), then calculating what proportion of the monthly repayment is now Principal vs Interest (90% in case of loan in last few years of it’s life), and I estimate that between EUR 200 to Eur 300 million per calendar month is presently being repaid by these older loans.

The latest CB figures show PSC fell EUR 1.7 Bn in May including a EUR 353 million drop in Total Outstanding Resi mortgages (incl Securitisation) down to EUR 145.8 Bn. Even allowing for these existing loan redemptions, it appears that new lending is negative too!

Obviously this only focuses on property lending & excludes term loans, credit cards, business overdrafts etc. It is nigh on impossible to get a handle on what the level of capital repayment is being made on the EUR 80 billion of mortgages that were taken out between 2004-2007, but it is probably of the order of another EUR 150 million per month (based on 80bn @ 3.5% @ year-5 in 30yr repayment mortgage). Another EUR 35 bn of resi mortgages were taken out between 2000-2004, so that would equate to a further 75 million a month in Principal repayments.

All told, Irish lenders could be reciving up to half a billion euros in capital repayments & redemptions on older homeloans. Therefore the net new lending to FTBs etc. would only be about EUR 150 million per month.

This would tie-in with IBF FTB data on Q1 2010 of EUR 469 million. (Incidentally for 2,300 buyers, so < 10,000 p.a. and many of these buy 2nd hand properties).

Net lending figures would be a great help.

If two of the six cases dealt with were overturned by the CRO, does that not imply a rather significant problem?

For instance, If a company is running a business, e.g. Shop, that is making profits of €60K a year but the company is loaded down with property loans it canot service to the company or to its shareholders then the bank is reluctant to extend credit to them. In normal times, one might sell the business or the properties but the truth is the market is becalmed (fire-sales or not). The end result is that a viable “business” if not a “viable company” is sent to the wall and jobs are lost.

Irish Independent - “SME property addiction hampers bank lending”
http://www.independent.ie/business/irish/sme-property-addiction-hampers-bank-lending-2257332.html

Many viable businesses are getting credit but at extortionate rates that is causing them to lay people off and making then strugle to pay creditors. This is having a huge negaitve effect on the economy.

Banks have ramped up their margins hugely. This is partly due to cost of funds to the banks. Of course, the cost of funds are high because the banks lent recklessly.

There is a feeling amongst business people that it is also due to the banks deciding to screw their customers to the Nth degree in order to shore up their balance sheets. Customers feel the banks know they can get away with it because there is no competition. There is fury from small businesses at what they percieve as vile opportunism and hugely arrogant lack of solidarity with the tax-payers and economy that is providing their life-support.

Statements as to the amounts being lent out will not disclose these problems.

And how is an economy to exit a credit splurge except by some reductions in credit i.e. delveraging?

Does the sainted Patrick Honohan - guardian of our financial stability - have nothing to say about all this? Or do his comments only apply in retrospect and never in real time?

This is political.

Separately, there are ways in which banks can fudge the figures

1. turning overdrafts into term loans
2. rolling over loans to improve cashflow -(for example) taking a 3yr loan in yr 2 and to help the firms cash flow turn it into a 5yr loan.
3. concentrate credit on firms already viable, if a company that looks good asks for 30k offer 50k and favourable terms with no penalty for prepayment - this will flush credit toward the companies that are going to survive anyway.

Frankly, forcing credit doesn’t sound like a good idea, to me, setting a target is arbitrary, what happens if they don’t do it? and worse, what if they do, or even beat the figure - will they be doing a societal good or manipulating their promise using one of the methods outlined above?

A far better solution might be to only allow deposit taking in this jurisdiction if you do a certain amount of lending, currently that distortion is ensuring that money that is going to be lent is doing so, but not in Ireland. This isn’t a call for protectionism, just seeking intermediation from the banking sector rather than a one sided version of it.

I think it is all for show. It is at best avoiding a drought by rationing. Extending the limited supply of credit in higher proportion to business will have to come at the expense of credit anywhere. Residential property, anyone?

I also am intrigued as to what constitutes business lending. We see from Anglo and indeed the big two that there was a lot more concentrated lending to individuals in the property business than their C&D books implied. Does a loan to a construction business for general business use constitute business lending or C&D lending?

In the last cycle the govt healvily incentivised bank lending to property. That did not end well. Now we install a credit Czar to implement a 5 year lending plan with specific sectoral targets. It reminds one of the old Soviet Union. Or maybe this is all just for show in which case the outcome might not be so bad.