UP TO 150 hotels are facing an uncertain future as Bank of Scotland (Ireland) yesterday announced it is to cease providing working capital to business customers by the end of the year due to the bank’s withdrawal from the Irish market.
It is estimated that the bank provides upwards of €30 million in working capital facilities to the hotel sector.
It is responsible for 20 per cent of all loans to the sector – equating to more than €2 billion in long-term loans.
While hotels, along with retail and business customers, will be obliged to repay their loans to the bank as normal, there is concern that the decision to withdraw working capital facilities will have a serious impact on the industry. According to the Irish Hotels Federation (IHF), the hotel sector is particularly dependent on working capital due to the seasonal nature of the industry.
The IHF’s Paul Gallagher warned that the withdrawal of working capital facilities in December would be “catastrophic”. He also highlighted the fact that other banks will be reluctant to take on new customers, particularly when asset securities will continue to be held by Bank of Scotland (Ireland).
Business representative groups from across the board expressed concern about the impact of the closure on Irish businesses.
It is estimated that up to 20 per cent of the bank’s 175,000 customers are business customers. While there is no specific breakdown of Bank of Scotland’s market share in terms of business accounts, research by Isme estimates that the bank has a 5 per cent share of SME customers.
Isme’s Mark Fielding said the closure would lead to a further deterioration in competition for SME lending. Both Isme and Chambers Ireland expressed concern about the ability of SME customers to secure credit from other financial institutions.
There was a mood of muted resignation among Bank of Scotland (Ireland) employees yesterday as they left their workplace on St Stephen’s Green.
One 25-year-old said there had been a breakdown of trust between bank and employees as workers had been assured in February that there jobs were safe.
“It’s hard to believe them [now] when they say that our jobs are safe for two years.”
Some workers complained that they had first heard the news through the media.
The 36 workers who lost their jobs immediately were told of the job cuts by management yesterday morning, while the remaining 800 staff were told of the news via a conference call.
Opposition politicians yesterday claimed that the bank’s exit from Ireland was an indictment of the Government’s economic and banking policy.
Labour Party finance spokeswoman Joan Burton said other foreign retail banks operating in Ireland were anxious to curtail their activity here, despite assurances from the Government that the banking situation is under control.
Fine Gael deputy spokesman on finance Kieran O’Donnell called on the Minister for Finance and the Financial Regulator to make a full statement about when they learned of the bank’s intentions.
Asked about the withdrawal of the bank from the Irish market, Minister for Finance Brian Lenihan said that there had been too much lending in the Irish economy, and the cost for any foreign bank pulling out would be met by the shareholders of that bank.
