A system of public savings banks, based on the German Sparkassen sector, could be adopted in Ireland to remedy the lack of competition in the sector and reduce the cost of borrowing for small firms and households, Fine Gael's Kieran O'Donnell has said.
The Senator is part of cross-party delegation from the Oireachtas finance committee in Germany this week to view how the network of local authority-owned banks operate.
The Sparkassen model has operated in Germany for 200 years as an interconnected network of 390 individual banks that, between them, operate 12,000 branches.
They undercut traditional retail lenders, providing low-cost loans and mortgages to companies and households. They offer SMEs a 3 per cent rate of interest for long-term loans (the rate in the Republic is higher at 5 per cent on average) and home mortgages at 1.1 per cent fixed rate of interest over 10 years ( the rate here is typically treble that).
Evaluating
Mr O'Donnell believes credit unions here or An Post could launch and operate a similar system. Irish credit unions currently have €7 billion on deposit with the main banks.
“I believe that the Irish banking market needs further competition. The purpose of this fact-finding mission is to see the German public banks model Sparkassen in operation on a day-to-day basis,” he said.
“We will be evaluating whether such a banking model or a variation of same could work here and what it has to offer to the Irish consumer, including access to credit and rate cost,” he said.
“It is essential that we look at alternative models of consumer and business banking,” said Mr O’Donnell, who is Fine Gael’s Seanad finance spokesman.
The Irish delegation will also visit the European Central Bank headquarters in Frankfurt to discuss the Irish banking landscape, including the potential for a public banking model here.
“Our findings would then be made available to inform and feed into public policy and the Government’s ongoing evaluation into how public banking concepts can be promoted in Ireland,” he said.
