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Latitude given to banks must be extended to home owners and small businesses

Issued : Tuesday 30 September, 2008

While many questions need to be answered in relation to the Banks Guarantee Scheme announced early today, one thing that is clear is that the latitude being offered to the banks by the taxpayer, must now in turn be extended to mortgage holders, small businesses and other customers of the banks.

During the heady days of rapid economic growth, banks and financial institutions were dishing out mortgages to first time buyers hand over fist. This practise played no small part in inflating the property bubble which left many young couples struggling to get a foot on the property market. It is these very people who enabled the banks make such massive profits in the good times, and that fact should now be acknowledged.

As the jobless figures grow, these same homeowners are now coming under increasing pressure, and in some cases may even be finding it difficult to make repayments. It is now incumbent on the banks to show latitude to these homeowners and to ensure that the nightmare scenario of houses being repossessed and families being turfed out on the street does not materialise.

Likewise, the lending criteria put in place by the banks in relation to loans for small businesses in recent years, were far too lax. Small businesses who took out large loans on the basis of ongoing economic growth, are now coming under pressure as the recessions begins to bite.

Today, the taxpayer is being asked to act as guarantor for bank deposits worth hundreds of billions of Euro. The banks must now demonstrate that they are not taking this goodwill for granted, and that they in turn will exercise their own responsibilities by extending favourable terms to under-pressure mortgage holders and businesses.