Thursday 18 October 2018

Call for savings banks

Sorcha Crowley

Sligo County Council has been urged to write to the Minister for Finance Paschal Donohoe to find out why there is a delay in licensing competition in the banking sector.

Councillor Marie Casserly tabled the motion at yesterday's November meeting of the council.

She called for a public banking sector to be set up similar to what exists in Germany in order to reduce the costs on Irish bank customers and mortgage holders.

Sparkasse Bank is one of several public savings banks operating successfully in Germany.

"Considering that the average Standard Variable Mortgage rate in Europe is 1.83 per cent, while the average in Ireland is 3.5 per cent, why has there been a delay in licencing competition in the Banking Sector?

"There has rightly been an outcry in relation to the Tracker Mortgage Scandal which has left many families suffering, and some have even lost their homes.

"There is, however, a greater scandal in Ireland that has gone unnoticed by many, which is the fact that standard variable rate mortgage holders, approximately 90 per cent of the total number of mortgages in the country, pay around twice the amount of interest that the average European pays.

"There are around 300,000 of these mortgages throughout the country, which amounts to over a billion euro of extra interest paid by these people every year, which amounts to €4,000 for every mortgage holder per annum, on average.

"The solution to this problem is the licencing of a public banking sector, along the lines of what happens in Germany.

"The credit unions should be utilised in relation to the setting up of a public banking system, as they have branch networks and most are carefully managed and run by a group of professional staff who know and respect their members.

"Public banking is a feature of the banking sector in many countries, particularly in Germany, where public banks have 12,000 branches, and 250,000 employees, and control 70 per cent of the mortgage market," she said.

"Public banks in Germany offer fixed mortgage rates of around 1% for a fixed term of 10 - 15 years. These banks are not for profit organisations, where if there is a surplus at the end of the year it goes towards improving the banks balance sheet, or is returned to the municipality for public good.

"According to the German representative who spoke to a Dáil committee recently: "It helps to strengthen the credit unions. Through the new public banks they could offer services that they are unable to offer now. They could use the services of a central services provider to make their own business more efficient."

"There are some ways in which it is possible to strengthen the credit unions through this new public banking system.

"It is a question of how to co-operate. And the commercial banks would be forced to offer more competitive rates," concluded Cllr Casserly.

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