James Reilly (Fine Gael) | Oireachtas source

After that introduction, I must welcome the witnesses warmly. I attended the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach to hear from Sparkassen. I also had the honour of addressing the Irish League of Credit Unions at their AGM a few years ago when I was a Minister. I am a great fan of both, and I will lay that on the table at the very outset.

I will address the credit unions first. Clearly, the witnesses see an opportunity here. I know they are frustrated to have €9 billion stuck in a low-return investment, and that they would much prefer to invest it in our communities where it can do social good. I have a couple of direct questions.

I have read the plan, which shows how it would be progressed. What do the credit unions see as the blockages and how do the representatives suggest that we as legislators address it? What needs to change in order for the credit union movement to achieve what it wants to achieve? Mr. Johnson spoke about the amount of funding available and 50% of lending that could be commercial, with 10% or 5% of assets of €16.5 billion. Perhaps he could give us the figure that he believes is still available to the credit unions under the current situation. If he was able to release the €9 billion, what it would mean for local economies?

On Mr. Felzen's comments, I wish to highlight that three quarters of enterprises in Germany are borrowing from an individual Sparkasse. I am very impressed that this banking system came about even though Germany has come through 100 years of all sorts of ups and downs. Ireland has had its troubles also, but in the overall scheme of things Germany has come through a lot more than we have in the last century.

What rate does the bank charge for overdrafts? We all realise how competitive the Sparkassen rates are for loans. They place in stark and poor contrast what the pillar banks are doing in Ireland currently by way of available rates.

My colleague asked about arrangement fees and Mr. Felzen said there were no such fees for SMEs for smaller loans. Will Mr. Felzen tell the committee what the cut-off point is for that? Is it €100,000, €200,000, €500,000 or €1 million before an arrangement fee might be charged to a prospective borrower?

I am very impressed by the fact that Sparkassen branches in a region only service, lend and reinvest in that region. This is really powerful.

I understand that Mr. Felzen had an excellent meeting this morning with Fingal County Council and Councillor Tom O'Leary. The possibility of branches opening in Fingal to service two constituencies, Dublin-Fingal and Dublin-West, was explored. Mr. Felzen also visited Blanchardstown. There are 800 farmers in the Fingal area and many successful food enterprises, such as Country Crest, Keelings, Keogh's Crisps and so on. The Sparkassen model would offer a huge opportunity for many of those who sometimes find the affordability of loans a challenge.

Mr. Felzen outlined how much it would cost to set up. For approximately €200 million, one could set up in the eight regions. Is it true to say this could result in a €2 billion financial injection into the local economies of the eight regions that are in scope? Will Mr. Felzen explain the key services that Sparkassen would provide? Reference was made to the central services provider and I presume the bank would have its own IT system also.

There was a lot of smoke and mirrors going on earlier. I wish to return to an issue to which I previous alluded, namely, the Central Bank's SME report and other reports that are to hand. The statistics are obvious. SME loan rejection rates in Ireland increased to 13.9% in the six months from March to September 2017. We have a problem even if others do not believe we do. The interest rates in Ireland for non-financial corporation loans are at 5%, which is higher than in comparative countries. We have already heard how the credit union would have to charge certain variable rates but I believe it is not inconsequential that these representatives are sitting beside each other as a group and that they are here together at the committee as a group. I am aware that while they have their separate agendas they are similar, but just with a different way of doing business. Perhaps there is room for exploration there. Notwithstanding this, I believe that if the answer is affirmative and that if Sparkassen - which has 100 years of experience in assessing loans - operated in Ireland, in two years there could be €2 billion extra in circulation for SMEs.

I especially like the fact that there is a lot of mentoring and supervision going on, and not in an intrusive way, so the bank can see the red flags if people are getting into trouble.

That was a lot of our problem during the financial crisis. We are not here to beat up our pillar banks by any means but there certainly was a commission-based performance culture. The more the banker lent, the more commission he or she got. I do not know that the same level of detailed supervision was in place that would be in place at Sparkassen banks or the credit unions. I would welcome that aspect.

Our local SMEs who are the driving force in Ireland's economy could really benefit by the presence of the Sparkassen model in this State. It would loosen up the arrangements without jeopardising financial stability for the credit unions. It would allow the credit unions to use money that has been gathered from the local community, which would be delighted to see reinvested in the community. When I was the Minister for Health this funding was on offer for building primary care centres. For one reason or another we had trouble with the Department of Finance and with Central Bank regulations and we were not able to avail of the funding. Mr. Seamus Boland referred to the ACC and the ICC banks years ago. Many businesses today would not be in business were it not for the presence of those two banks at that time. I know there will be problems, issues and difficulties, but I am hugely supportive of what both groups are trying to do. If they can see a symbiotic, cohesive and productive engagement between them it would be all to the better. The Government, however, is considering this report. I believe it may be in the Department of Rural and Community Development. I am not sure. We strongly look forward to the report coming out. I certainly lay my cards on the table when I say that I want to see a positive response to the report and for the opportunity to be grasped to give society and our own communities back a little bit of control over their own destiny. I thank the representatives for coming to the committee. I hope they will be able to answer the questions I put to them. I am sorry for speaking for so long but it is because I am very enthusiastic about the matter. I hope the witnesses have not lost track of my questions.