Business World

Sunday 24 June 2018

Sparkasse to tell TDs it is 'deeply convinced' model can work in Ireland

Banking

German public bank Sparkasse. Photo: Getty
German public bank Sparkasse. Photo: Getty

Fearghal O'Connor

German public bank Sparkasse is to tell an Oireachtas committee this week that it is "deeply convinced" that its model could improve the Irish banking landscape.

Officials of bank, which has been seeking to establish its locally-owned state-financed model in Ireland, will tell the Committee on Business, Enterprise and Innovation that the model could bring benefits in terms of costs, services and social responsibility.

The organisation - a not-for-profit bank with €1.1 trillion in assets - has previously claimed that it could bring German-style low interest rates to the Irish lending market for both mortgages and loans to small and medium-sized businesses. A presentation to the committee will highlight how loan approvals by the savings bank in Germany grew cumulatively by 16.9pc in that market in 2015.

In that country, Sparkasse offers long-term SME loans at 3pc interest rate and 10-year fixed mortgage rates of 1.1pc fixed for 10 years.

"We are also basically discussing the question to what extent a common-good-oriented, local banking model could shift the dysfunctional Irish banking market towards a higher level of competition, towards better services and better prices for Irish customers," said a draft of the presentation, seen by this newspaper.

"Based on the public service mission a possible Irish Sparkasse model not only has a banking role, but also has a role to play in society. And in accordance with this mission, the success of a Sparkasse model in Ireland has to be measured by its local social, cultural and common good impact, which goes far beyond the basic expectation of sound business management."

The draft presentation claimed that the bank has shown "a long-term commitment to the real economy, preventing credit crunches".

"This has proved particularly true in times of crisis. Sparkasse increased their volume of new loans to enterprise from 2009 to 2015 every year. This in turn enabled the German economy to recover quickly," it said.

Sparkasse is proposing establishing eight independent regional public banks in Ireland, starting with a pilot bank in the midlands with up to five branches. Sparkasse's role would be to provide expertise. It would not put up the required funding for the new public bank.

Both the Department of Finance and the Central Bank are believed to be lukewarm at best about the proposal. But the Oireachtas finance committee has previously issued an invitation to senior credit union movement officials and An Post to meet the German bank to discuss a proposed new banking model. That committee is expected to travel to Germany to learn more about the model.

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