Making banks work

Banks are businesses; their purpose is to make profits for shareholders. But banks also play a vital role in the functioning of the wider economy, enabling funds to be saved and transferred, offering financial services, and providing credit.

On 15 February, and in the last of its Masterclasses in the current series, the Centre for Economic Empowerment explored the contemporary role of banking and how it can be better aligned with the needs of the economy. The CEE was joined by Professor Jim Stewart (School of Business in Trinity College Dublin) and Nigel Smyth (Director of CBI) to discuss these important issues.

Professor Stewart examined the role of the financial sector in the crash in Ireland and argued that small and medium sized enterprises (SMEs) have been particularly affected by the subsequent tightening in bank lending. As well as improved international regulation, he suggested alternative banking in the form of mutuals, credit unions and specialised banks could form part of a solution.

Nigel Smyth discussed both the supply and demand for finance in Northern Ireland. He emphasised that while loan criteria have become more stringent, there are also questions around the willingness and readiness of local businesses to borrow. He proposed greater use of venture capital funding in Northern Ireland, national loan schemes that are more reflective of Northern Ireland’s needs; increased financial commitment from the NI Executive for lending to SMEs, and better lending information and coordination between banks, business and the Executive. He also explored the potential of alternative financing options such as peer to peer lending

Speaking after the event CEE Co-ordinator Peter Hutchinson said, "Banks are in a difficult position; on the one hand we want them to be less profligate with their lending practices, but on the other we need them to continue to lend to businesses, particularly SMEs which make up the vast majority of our economy, and which often find it harder to access finance. The speakers suggested potential solutions to this dilemma in the short-term, but also underlined the need for longer-term reform in order to prevent another crisis and to make banking more useful to the broader economy."

CEE Masterclass - Making Banks Work from NICVA on Vimeo.

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