Banks fail to pass on business loan funds

European Union finance ministers approved the $20 billion aid for small businesses as credit began to dry up in 2008, the EUobserver reported.
But a watchdog group, Bankwatch, based in the Czech Republic, said the European Investment Bank has only handed out 74 percent of the funds to commercial banks and that only 69 percent of what was disbursed was distributed through small business loans.

Commercial banks, the figures indicate, held onto half of the $20 billion funds that targeted small businesses.

Bankwatch said only 0.001 percent of businesses in the study area that included Hungary, Poland, the Czech Republic and Slovakia received loans.

Outside of the study area, in Ireland, "We don't know the number of loans given under the EIB funding, but we haven't got the sense that a lot is flooding out the door," Ian Talbot, chief executive officer of Chambers Ireland said last year.

The report released Wednesday said the funding "provided a boost to the intermediary banks which took advantage of it."

"For these banks, it appears to have been easier and cheaper to hang on to the funding for as long as possible," the report said.

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