Is our stake in AIB stopping us backing a public bank?

Community banks could help revive rural Ireland — so why is Government dragging its heels? asks Willie Penrose

LAST week’s Sunday Independent revealed the behaviour of the Department of Finance in trying to frustrate the development of Sparkasse public banks in Ireland — a move that would provide cheaper loans for home owners and small businesses.

I have raised this on a number of occasions in the Dail over the past 18 months having dealt with the German Sparkasse Foundation (SBFIC).

The foundation has done an enormous amount of work in Ireland investigating the potential establishment of an Irish-made and Irish-owned pilot local community public bank in the Midlands. They were invited in by Irish Rural Link who are generating new ideas to revive rural Ireland.

It is an excellent initiative — but to date the Department of Finance has been lethargic in its engagement with the project. It is obvious Finance officials are recalcitrant about the idea. As reported in the Sunday Independent, they are totally focused on the AIB and B of I — with no regard for the ordinary customer.

I know first-hand how Finance operates because I saw the same behaviour from the department and the Minister when I introduced the Bankruptcy Bill in the Dail in 2015. They oppose all new ideas outside the system and try to strangle them through inertia.

The Programme for Government commits to the inves- tigation of a local community banking network in Ireland.

The concept of a local community bank is poorly understood in an Irish context. A public bank is emphatically not a nationalised bank such as AIB. A public banking model has existed in Germany for 200 years. German public banks, called Sparkasse: • Are municipally owned — not a nationalised bank • Would be not-for-profit and be restricted to lending to the regional economy for its business • Would fill the gap left by the demise of the building societies and the ACC • Both the Post Office and credit unions could earn additional income from selling public bank services across the counter in their branches • It could provide administrative support for credit unions in meeting ever more onerous Central Bank regulation • Would provide a suitable vehicle for European Investment Bank to lend funds to SMEs

What is at stake is enormous for the regions. I understand that the Sparkasse Foundation are willing to offer considerable technical expertise and help to mentor a pilot local community public bank in the Midlands — even to the extent of providing training and mentoring of staff until it is up and running.

This would be very much along the model of how the American credit unions mentored the embryonic Irish credit union movement in the 1950s and 1960s. The funds required are modest and the return for society would be enormous

The credit unions and local post offices are crying out for bold initiatives from government to allow their massive untapped funds support SMEs and revitalise their business model (€9bn by the most recent estimate of the League of Credit Unions).

We know the pillar banks rip off the consumer with above-average interest rates and their activities are focussed on the engine of growth in the greater Dublin area. Our civil service mandarins confuse the pillar banks’ interest with the national interest, and as a result communities are left abandoned and starved of the credit they need to develop.

While I know the Minister for Rural Affairs, Michael Ring, is genuinely sympathetic to the idea, his Fine Gael colleagues along with much of Fianna Fail have fallen into line behind the Department of Finance’s agenda.

We are not talking about the facilitation of a foreign bank. The Sparkasse Foundation’s offer of help is a gesture of solidarity to mentor an Irish-born, Irish-made, Irish network of community banks that strengthen our credit unions, post offices and SMEs in the regions.

We have a great opportunity to tackle the challenges of the next few years. The Government should not squander it — it should seize the opportunity!

‘Civil servants confuse pillar banks’ interest with national interest’