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New Protocol Needed For Negotiations Between Banks & Small Businesses In Financial Difficulty

Published on May 26 2014 1:26 PM in Retail

New Protocol Needed For Negotiations Between Banks & Small Businesses In Financial Difficulty

(27 May) The Irish Farmers’ Association (IFA), the Vintners Federation of Ireland (VFI), Irish Property Owners Association (IPOA) and RGDATA have joined together to send a clear message to the Government that the current basis on which negotiations between banks and small businesses in dealing with credit difficulties, is not working. 

The groups released a joint statement saying, “While the Irish economy is beginning to recover from the worst recession experienced in a generation, a significant number of small, family-owned enterprises are still facing financial difficulties.

"There remains a pressing need to ensure that these difficulties are resolved in order to maximise the numbers employed in small enterprises across Ireland. Regrettably, it has become clear to the bodies representing family businesses in key sectors that the action of some of the banks is actively damaging the recovery for some businesses.”

The statement went on to say that acceptable compromise and viable solutions are not being reached. “The Government and Central Bank must ensure that engagement between these enterprises and the banking sector is undertaken with the primary objective of retaining the viability of the core business and keeping people in employment,” it said. 

RGDATA Director-General Tara Buckley commented, “Viable business will close and jobs will be lost unless the banks are forced to change their approach to customers in distress. The problem is particularly acute with customers of foreign banks that are winding down their Irish businesses. All banks must be forced to be reasonable in trying to reach a resolution with co-operative customers." Buckley said the banks should be stopped from driving retailers out of business through withdrawing credit facilities and rushing to forced sales. "It’s time the banks focused on helping not hindering these retailers who are the heart of the majority of town centres in Ireland”. 

The groups also called for lenders to adhere to the Code of Conduct for Business Lending to Small and Medium Enterprises, but said the code does not provide sufficient protection to customers facing “unreasonable pressure” from banks. The group suggested some protocols for banks to assist both lenders and borrowers including a dispute resolution/mediation service. 

IFA President Eddie Downey said, “If we are going to maintain the maximum number of viable farm businesses, there must a fundamental change in the process of negotiation with the banks. Both the borrower and lender must be prepared to contribute to a sustainable solution, with negotiations entered into on the basis of reaching full and final settlement”.

IPOA Chairman Stephen Faughnan added, “Financial institutions are not adhering to the current codes and lack a basic understanding of the pressures that vulnerable people face. This is an opportunity for joint consultation to reach a satisfactory conclusion. While it may not solve all cases, it should go a long way to resolving the majority of them on a mutual basis. Pain will have to be endured on both sides if these issues are to be resolved”.      

© 2014 - Checkout Magazine by Genna Patterson

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