Tuesday 23 October 2018

Exploratory talks between credit unions and Sparkasse bank could be held 'within weeks'


Chairman of the Oireachtas Finance and Public Expenditure Committee John McGuinness. Photo: Collins Dublin, Gareth Chaney
Chairman of the Oireachtas Finance and Public Expenditure Committee John McGuinness. Photo: Collins Dublin, Gareth Chaney

Fearghal O'Connor

Exploratory talks on a potential partnership between Sparkasse and Irish credit unions could begin within weeks, after the German community bank promised it could introduce low interest rates for both mortgage and SME borrowers.

Oireachtas finance committee chair John McGuinness told the Sunday Independent that he has issued an invitation to credit union officials - as well as An Post - to meet the German bank to discuss its proposed new Irish banking model.

The Fianna Fail TD said he had spoken last week to credit union officials who were open to the idea of joining forces with the German bank.

Sparkasse - a not-for-profit bank with €1.1trn in assets - has proposed establishing eight regional public banks in Ireland, starting with a pilot bank in the midlands with up to five branches.

The midlands bank would have a capital need of between €15m and €20m, with the entire network of eight separate banks costing between €150m and €200m, said a senior Sparkasse executive.

"I do not see any reason why mortgages in Ireland should be more expensive than in Germany," said Niclaus Bergmann, managing director of Sparkasse's international arm. In Germany, Sparkasse offers long term SME loans at 3pc interest rates and 10-year fixed mortgage rates of 1.1pc.

"We are talking about competitive interest rates. We have an approach which is not shareholder-value driven. It is not about earning money but fulfilling a task," he said.

But Bergmann also made it clear that Sparkasse's role was to provide expertise rather than to put up the required funding. McGuinness said he had discussed the plan with senior people in the credit union and that they are "open to the idea".

"If the credit unions decide that this is a good idea they could capitalise any one of those banks. The credit unions have a fund of €7bn that is deposited in the main banks at the moment and that could be used to capitalise any of the Sparkassen type banks around the country," he said.

McGuinness said he hoped the proposed meeting could "move things forward" and that the next step could be to bring the Department of Finance and the Central Bank to the next meeting.

Sunday Indo Business

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