Brian Hayes, Chief Executive, Banking & Payments Federation Ireland, responds to David McWilliams’ opinion piece The Irish banking system is not working – and that rarely ends well published in the Irish Times on February 14th 2026.
David McWilliams’s rather one-sided assessment of the Irish banking sector under the guise of “Opinion” needs a response. It needs a response for two reasons. Firstly, to contradict his view with facts to show that Irish banks are lending and are ambitious to do more lending in the Irish economy. But secondly to explain, something he chose to ignore, that the entire banking landscape that emerged from the great financial crisis has utterly changed from a regulatory and prudential standpoint. New rules on capital, on liquidity, on governance, on lending – all point to fundamental change since 2011. Do we really want to go back to the bad lending and borrowing practices of the “Celtic tiger” years as he would seem to suggest.
A well-functioning banking system is essential to a modern economy. It supports households buying homes, businesses investing for growth and the wider circulation of money through society. In recent years one important part of the Irish banking system’s role has been, and remains, to support households and businesses through challenging times. This was clearly evident, for example, in how the sector responded during the Pandemic providing payment break supports for households and SMEs.
How a bank lends is one of the most consequential choices it makes over the economic cycle. It is a long-term commitment that must be grounded in customer demand, regulation and the capacity of banks to absorb risk. A system that ignores those constraints may expand credit quickly, but it will not serve the economy well over time.
It is important to start with the facts. Irish banks are lending, and they are lending at scale. Mortgage drawdowns totalled almost €14.5 billion in 2025, the highest annual value since 2008, with first time buyers representing the largest share. Personal lending has also strengthened, with the most recent Central Bank of Ireland data showing that household loans for over 1 year and up to 5 years reached an outstanding value of almost €11.9 billion by the end of September 2025, the highest level since June 2012. Taken together, outstanding credit advanced by banks to Irish households and businesses increased from €135 billion at the beginning of 2022 to €148 billion in June 2025. These figures reflect lending reaching households and businesses in the real economy and a system that supports demand.
Looking specifically at SMEs in recent years, demand for credit has been far more subdued than public debate often suggests. Ireland is not unique in this regard. Across the EU SME credit demand is weak in the aftermath of both the GFC and Covid. The Department of Finance’s latest SME Credit Demand Survey shows that only around one in five SMEs applied for bank finance in 2024. Crucially, the majority of firms that did not apply said they simply did not need credit, as they had sufficient internal funds. Where businesses have faced genuine financing pressure, the State has provided targeted support.
The Ukraine Credit Guarantee Scheme, introduced in 2023 with a total capacity of €1.2 billion, was designed to help firms manage sharp cost increases following the invasion of Ukraine. By the end of December 2024, just over €400 million had been drawn down. The scheme has been valuable for those who needed it, but its utilisation again points to limited demand rather than a shortage of available credit.
Even when demand exists, banks cannot lend indiscriminately. In banking deposits are often short term, while loans are typically long term. Managing this mismatch is central to financial stability. In response to the financial crisis, banks are now required to hold high quality liquid assets and stable funding buffers so they can withstand periods of stress without cutting off credit to households and businesses.
Credit quality standards have also tightened significantly across Europe. The European Banking Authority’s loan origination and monitoring guidelines require lenders to carry out key affordability and creditworthiness assessments, apply prudent collateral valuation, price risk appropriately, and monitor loans throughout their life. Regulation also shapes how much and where banks can lend. If you want to buy a house and you go to your bank requesting a mortgage, your bank doesn’t ask the central bank’s permission to lend you, but it has to follow the Macro Prudential rules (introduced in 2015) set out by the central bank in terms of how much they can lend you.
Capital requirements across Europe were rightly strengthened after the crisis. However, Irish banks continue to face higher capital requirements for certain types of lending than many of their European peers, particularly in mortgage and SME lending. Irish banks on average still hold nearly 50 per cent more capital for lending to small and medium sized enterprises (SMEs) compared to their European counterparts and nearly twice as much capital for mortgage lending. It is important to recognise that regulation, capital and funding constraints are integral to how lending works in practice. Money creation through bank lending is real, but it is not unlimited. Credit growth is decided by customer demand, by the safeguards designed to protect borrowers and the financial system, and by the hard economics of funding and capital. There is a cost of capital and the cost of risk attached to all lending.
Ireland has a banking sector that is resilient, competitive, and profitable enough to support households and businesses through all phases of the cycle. Yes, bank profitability has improved after 10 years of ECB quantitative easing and the “lower for longer” interest rate environment. And equally over that 10-year period two significant international retail banks have left the Irish banking market. Why is it that “commentators” refuse to ask why these banks decided to leave? It is an open question that maybe David McWilliams will address at some point.
