Irish Banks: Government rules out local public banking model 

Analyst: Owen Callan (Website & LinkedIn)


The Irish government last month released an extensive report and review on proposals for a Local Public Banking model to be introduced into Ireland. The report found that that there was not a compelling case for the State to establish such a model.


The coalition’s ‘Programme for Government’ committed the Government to investigating the German Sparkassen model for the development of local public banks. This commitment was in response to a belief that there was a lack of competition within the Irish banking sector, and that rural/regional communities in particular were not being provided access to an adequate provision of SME credit supply and accompanying banking services. The report, which runs to over 200 pages, looked at the Sparkassen (Germany) and Kiwibank (New Zealand) models of local public banking as examples of how a local public banking model might work in Ireland.

The cost to the Exchequer for the proposed new model has been estimated at a minimum of €170m, based on 7 local public banks being set up on a well-defined regional basis. The report found that the assumptions in the proposal based on costs, interest rates and loan attrition rates, appear challenging, and the suggested locations in the proposed pilot scheme in the Midlands would overlap with existing banks, credit unions and post offices. Further, it was not fully clear what the State’s role in a local public banking system should be. The report also noted the availability of SME financing through non-bank or alternative lending institutions, and that a range of government supports for SME financing were also available.


We have long held the view that the prospect of a local public banking model along the lines of the Sparkassen model was unlikely to be introduced in Ireland, given the heavy set-up and capital costs that would be required, and given the overlap such a model would have with both An Post (post office) and the credit union sector. We believe that the potential for any augmented ‘community banking’ services are best channelled through investment and restructuring of these institutions which are already well established across the State and within the rural/regional communities in particular.

Pat Webb
Investment Manager
T: 086 335 1856

Nigel Poynton
Investment Manager
T: 087 223 1418