With two commercial banks set to exit the Irish market within weeks of each other, the Central Bank and the Department of Finance should seriously reconsider the introduction of European-style public banking, a Fine Gael Senator has said.
Speaking following the announcement that KBC are in discussions to exit the Irish financial sector, Senator Regina Doherty said: “With reduced lending provider options for people and businesses, Ireland’s competitive offering in our banking sector is not where we would like it to be.
“With the possible exit of KBC, on top of the exit of Ulster Bank, we will soon have just two commercial lenders and three mortgage lenders in this State.
“If we look to our EU neighbours, many already have solutions in place to increase competitiveness through the establishment of ‘Public Banking’, state-owned institutions with decentralised structures. Other EU countries with strong public banks include Germany, France, Italy, Belgium, Norway, Portugal and Iceland.
“The 2019 report by the Departments of Finance and Rural and Community Development entitled ‘Local Public Banking in Ireland’, concluded that there was ‘not a compelling business case for the State to establish a new local public banking system’, however in recent months the banking sector here has seen dramatic change with the exit of the only two foreign subsidiaries.
“In Germany, Sparkassen Banks are owned by local Government and operate as a hybrid of a traditional commercial bank and what we know here as a Credit Unions. It provides an alternative option to increase competition in the market and deliver better overall outcomes for consumers.
“While discussion in a Banking Forum could be useful, now is the time for action, not talk. The banks leaving the market need to be replaced, and replaced now, not in 12 or 18 months’ time.
“A pilot should immediately be set up to properly test the benefit that public banking can provide to the Irish market. Representatives from North County Dublin previously visited Sparkassen Banks in Germany in 2018 so this could be an ideal location for such a pilot.
“It is not unreasonable to expect that consideration should be given to the introduction of Public Banking here in Ireland, where we are increasingly being left with a reducing number of lending providers, threatening the competitive options available to consumers”, Senator Doherty concluded.