Ger­man bank needs €30m from State for low-rate loans plan

A key re­port on pro­pos­als for the model in Ire­land is due, writes Fearghal O’con­nor

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE -

GER­MAN bank Sparkasse plans to es­tab­lish a €30m pi­lot project in West­meath and Fin­gal, with each area twinned for sup­port with an in­di­vid­ual not­for-profit re­gional bank in Ger­many, the Sun­day In­de­pen­dent has learned.

But the plans hang on a key re­port into com­mu­nity bank­ing mod­els that is with Depart­ment of Fi­nance of­fi­cials and ex­pected to be pub­lished within a fort­night, ac­cord­ing to sources.

Sup­port­ers of the model ar­gue that, be­cause it does not need to make a profit for share­hold­ers, it could charge low Ger­man-style in­ter­est rates on mort­gages and busi­ness loans. Sparkasse would pro­vide ex­per­tise and sup­port but the €30m ini­tial fund­ing would need to come from State re­sources.

If the re­port is pos­i­tive to­wards the Sparkasse-type model, there are plans to es­tab­lish a stake­holder group to pre­pare a fund­ing model and adapt it to Ir­ish reg­u­la­tions and cul­ture, said a source.

But ac­cord­ing to sources close to the process there are still nu­mer­ous hur­dles, with an ex­pec­ta­tion that key gov­ern­ment of­fi­cials may be wary of the dis­rup­tive im­pact such a model could have on the lo­cal lend­ing op­er­a­tions of pil­lar banks.

Sim­i­lar fears around com­pe­ti­tion also ex­ist within the credit union move­ment.

But some there see po­ten­tial syn­er­gies that could al­low credit unions greater ac­cess to SME and mort­gage lend­ing, it is un­der­stood. At least three Ir­ish del­e­ga­tions may visit Ger­many over the com­ing months to see the bank­ing model in ac­tion, in­clud­ing the Oireach­tas fi­nance and busi­ness en­ter­prise com­mit­tees, as well as Fin­gal of­fi­cials and coun­cil­lors.

“We’re anx­ious to see the bank work­ing in prac­tice and to meet lo­cal gov­ern­ment to hear how it works for them,” said Fin­gal Fine Gael coun­cil­lor Tom O’leary, who has backed the plan.

Ger­man lo­cal gov­ern­ment of­fi­cials sit on the gov­er­nance boards of re­gional Sparkasse banks, but a sep­a­rate ex­ec­u­tive board made up of qual­i­fied in­di­vid­u­als is tasked with day to day run­ning.

O’leary said he was aware of a lot of sup­port for the plan within his own party and that the se­lec­tion of Fin­gal — close to Taoiseach Leo Varad­kar’s po­lit­i­cal power base — as a pi­lot area was sig­nif­i­cant.

West­meath Labour TD Wil­lie Pen­rose — also a vo­cal ad­vo­cate of the model — told a re­cent Oireach­tas agri­cul­ture com­mit­tee meet­ing that it could pro­vide money to peo­ple “at rea­son­able prices”.

“I imag­ine the bank rep­re­sen­ta­tives will tell me they are do­ing that,” said Pen­rose, pic­tured. “If that is the case, why is there hue and cry through­out the coun­try? A well-to-do farmer deal­ing with one of the in­sti­tu­tions be­fore the com­mit­tee asked me to keep high­light­ing the need for a Sparkasse model or a sim­i­lar model in this coun­try to give ‘those boyos’ — that is what he called the banks — a rub of com­pe­ti­tion. “The farmer in question works ex­tremely hard. He works 18 hours a day. He is work­ing the flesh off his bones to meet his com­mit­ments. He be­lieves the banks are charg­ing too much.”

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