Sunday, May 12, 2013

Bank plans backing for small Europe businesses

ISTANBUL: The European Bank for Reconstruction and Development (EBRD) is considering ways to help small businesses in emerging Europe, including through direct lending, as the region suffers lacklustre growth, its president said yesterday.
The European Central Bank and the International Monetary Fund have also expressed concern about the reluctance of banks to lend, so delaying a longed-for recovery in Europe.
EBRD president Suma Chakrabarti said following the bank's annual meeting that it was a question of: "How to do more (for small and medium-sized enterprises) in a way that maximises job impact and growth. What's the right balance ... do we go through the banks more or do we do a more direct approach?"
The bank slashed its 2013 growth forecast on Friday for its emerging Europe and North Africa region by almost a percentage point, to 2.2 per cent.
The European Investment Bank, whose president took part in panel discussions at the EBRD meeting, has also said it plans to lend more to small business.
Banks across Europe have plenty of cash but are reluctant to lend it because of caution following the global financial crisis, along with increased regulation.
"Liquidity of the banking sector is in good shape in principle but the credit channels do not work in full capacity because of the lack of demand with good quality from credible borrowers," Russian deputy finance minister Sergei Storchak said at the meeting.
Direct lending has risen to fill the bank lending gap, but this can also carry greater risks, Chakrabarti said, as lenders need to be very familiar with their countries and sectors.
Non-performing loans are also a growing concern, the Bank's chief economist Erik Berglof said.