Ireland is intently listening as German Sparkasse bank proposes to bring its successful Public Bank model to Ireland. Sparkasse wants to help establish eight independent Irish regional Public Banks. It is proposing a pilot bank with five branches in key towns. The new Public Banks could break even within three years and could be up and running within a year, says Sparkasse international managing director Niclaus Bergmann in an article in The Independent.
"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.
Any profits that do accrue are either used to strengthen the regional bank's capital position or passed back to the local authority to be used for "social purposes".
The Sparkasse model has operated in Germany for 200 years as an interconnected network of 390 individual local authority-owned banks that, between them, operate 12,000 branches.
It is the bank's lending model that really catches the eye. In Germany it offers long-term SME loans at a 3pc interest rate. Its best mortgage rate for home buyers is 1.1pc fixed for 10 years. Asked could the proposed Irish Sparkasse match those rates, a senior Sparkasse executive told the Joint Oireachtas Committee on Finance that this was part of the Irish proposition.
"I do not see any reason why mortgages in Ireland should be more expensive than in Germany," said Niclaus Bergmann, managing director of the international arm of the bank, which has already brought the Sparkasse model to a number of European and South American countries.