Most people were probably thinking it, but now Ireland’s lead banking regulator has come out and said it.
The banks may not have enough capacity to be able to properly help get the country back on the road to recovery.
‘With SMEs accounting for over 1 million employees, or nearly 70% of total employment in the Irish business economy and they will form an important part of the economic recovery when it comes’ writes Gabriel Makhlouf in his blog.
Thats the good part.
What is clear is that the way forward after this pandemic for the financial system is very unclear!
‘The crisis means many of them are sustaining losses, which threaten their survival; one of the main objectives of policymakers is to ensure that viable businesses are able to weather the storm and so help the economy to recover. A resilient financial system is key to enable firms to access liquidity. The banking system would be expected to play a role in providing that liquidity and the actions we have taken mean that banks are better placed to meet demand for credit from firms (whether that is through drawing on existing credit lines or the extension of new credit). ‘
‘But—as our research has shown—there are also a number of frictions which mean the banking system on its own may be an insufficient source of liquidity. For example, some firms may not have an existing relationship with a lender or may have insufficient collateral to secure a loan. In addition, the willingness of lenders to lend may adjust as the economic shock evolves or as they respond to actions by third parties, whether competitors, governments or regulators.’ he writes.
Strap yourselves in folks!