Non-bank lenders reduced the risk of a major credit supply shock for Irish businesses after Ulster Bank signalled three years ago that it was exiting the market, according to a Central Bank of Ireland paper.
Still, the paper concluded that Ulster Bank’s retreat “constituted a significant credit supply shock for its customers”, with those that borrowed from the lender in the two years prior to the announcement about 3 per cent less likely to receive a new credit agreement elsewhere in the following two years.
Drawing on extensive data from the Central Credit Register, where lenders are required to submit figures on loans with balances of more than €500, the research found that credit from Ulster Bank to firms started to fall from the time The Irish Times first reported in September 2020 that NatWest was considering winding down the Irish unit. NatWest confirmed in February 2021 that it was withdrawing from the Republic.
The Irish business debt market has been transformed over the past 15 years from one dominated by eight banks and a handful of alternative finance providers to one where there are only three surviving domestic banks, while more than 60 non-bank lenders are targeting various parts of the SME market.