Willie Penrose (Longford-Westmeath, Labour)
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I thank the Ceann Comhairle for allowing me to raise this important issue, namely, the necessity of developing a model or system to provide a local banking system in Ireland. I am glad to see Deputy Joan Burton in the House because she has been a strong advocate in that regard and done a lot of work on the issue.

The report by the Department of Rural and Community Development on this matter was a severe disappointment, which is an understatement. It was a stomach churning event. It was a damp squib and a kick in the teeth for many, including Deputy Joan Burton, as it appears the conclusions were arrived at first and that evidence was then divined to underpin them. It represented the dead hand of bureaucrats at their best, particularly those in the Department of Finance, as I had correctly anticipated and predicted in a number of debates and parliamentary questions on the matter in the past six or seven months.

Be that as it may, I pay tribute to Irish Rural Link, Mr. Seamus Boland and the staff - Ms Sinead Dooley, Mr. Noel Kinahan and others based in Moate - who have done so much work in bringing the concept of community banking to the fore in the debate and seeking to turn the tide on the decline of banking services in rural communities, including SME lending and relationship banking.

I read with some wry amusement the comments made in the report. Some of those involved obviously never left their ivory towers in Dublin. They started to tell us how great things were on the ground down the country.

Public banking is poorly understood in an Irish context. A public bank is emphatically not a nationalised bank like AIB. In other EU member states public banks are often municipally owned and restricted to a specific geographical area in order to promote regional development. We need such development in the midlands, across counties Longford and Westmeath, as well as in counties Sligo, Leitrim and Donegal. These banks are not for profit and can provide a valuable impetus for regional development and be an alternative to the major shareholder-driven private banks. Of course, that is the essence of the problem. Given the disappearance from the Irish financial landscape of building societies, the old Trustee Savings Bank, the ICC and the ACC which offered agricultural credit facilities, there is a clear gap in the services available between the credit unions and the big banks. But for the credit unions - the poor person's bank - nobody would get a shilling. Everybody would be wiped off the pitch.

In the light of the misbehaviour exposed in Irish banks and the financial crash about which Deputy Joan Burton has spoken so often, many commentators have suggested the big banks' monopoly of retail banking needs to be challenged by a new service provider with a different ethos. Of course, the report ran away from the real issue and attempted to disguise the fact that the Department of Finance's sole aim was to insulate and protect the State's investment in the pillar banks from competition. That is what the report is about. While it is welcome that there will be a further independent assessment of public banking, with the credit unions and An Post, the Labour Party, including, I am sure, Deputy Joan Burton, will be seeking an assurance that it will be acted on by the Government and that the credit union movement will be given a clear road map for how it can develop and expand its services to the community.

I take the opportunity to point out that what is being asked of the Government is not a State investment of €170 million in a German bank. The Department rushed that out to The Sunday Business Post. I knew the answer that was going to come yesterday. It struck first and got its retaliation in first. It is about the Government developing a new culture in Irish financial services to get away from the greedy maximisation of profits by the big banks. That is what the Sparkassen group is most preoccupied with - developing a new culture in Irish banking - but, of course, our friends in the Department of Finance do not want to have anything to do with it. I know from the bankruptcy legislation how it behaves. I was there. It tried to strangle all ideas coming from outside the system. During the past few years it has come to confuse the national interest with the interests of the AIB-Bank of Ireland duopoly. We have seen the credit union movement which has less than 30% of its assets in loans blocked in expanding its services. The Central Bank has a tin ear when it comes to listening to the credit unions. We see this behaviour in how it approached Irish Rural Link's proposal. It is scandalous. Why not introduce the Sparkassen model and use it to complement An Post and the credit unions and give us a new method and vehicle for ensuring small businesses, farmers and others involved in agriculture can securing funding for their vital businesses in rural Ireland?

Michael D'Arcy (Wexford, Fine Gael)
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The Department of Finance and the Department of Rural and Community Development were tasked with fulfilling a programme for Government commitment to thoroughly investigate the German Sparkassen model for the development of local public banks that operate in well defined regions. Both Departments prepared a report on the findings of their investigation which involved an analysis of the Sparkassen model.

As the Deputy is aware, the report on local public banking in Ireland was published yesterday. It outlines the current banking environment in Ireland, particularly in respect of access to finance by SMEs and the mortgage market. It then summarises the Sparkassen model of local public banking as it operates in Germany. A considerable analysis was undertaken and there was careful consideration of a proposal for how the German Sparkassen model of local public banking might be implemented in Ireland. The proposal was put forward by Irish Rural Link and the Savings Banks Foundation for International Cooperation, the international development wing of the Sparkassen group. The report also contains a summary of the responses to a public consultation exercise that was carried out to seek the view of stakeholders and other interested parties on local public banking and its potential in Ireland.

Ultimately, the report has found that there is no compelling case for the State to establish a new local public banking system in Ireland in the proposed form. There are a number of reasons for this. The cost to the Exchequer of the proposed new model is estimated at a minimum of €170 million. Furthermore, the Government currently has shareholdings in AIB, Bank of Ireland and Permanent TSB and its priority is reducing its shareholdings in a manner that will recover the taxpayers' investment over time. Local public banking, as proposed and considered in the report, would involve further State ownership in the banking sector.

The Government is committed to supporting greater competition in the banking sector. There is, of course, no impediment to interested parties separately pursuing the establishment of a system of local public banks in a manner that does not involve Exchequer funding. The Government would encourage any potential new market entrant to engage with the Central Bank of Ireland and the Department of Finance on the matter.

Additionally, there are a number of challenges related to the assumptions underlying the business model for a local public banking system that is proposed and considered in the report. They include assumptions regarding the proposed cost, interest rates and loan attrition rates. Similarly, the suggested locations in the proposed pilot scheme in the midlands would overlap with existing banks, credit unions and post offices.

The Government recognises there are a number of positive aspects underlying the concept of local public banking in general. They include increasing access to finance for SMEs and supporting local communities and economies. The Government is fully committed to supporting SMEs and regional and rural development. It has already put in place a number of policy measures to support these goals, including the Strategic Banking Corporation of Ireland, the Supporting SMEs online tool, the microenterprise loan fund scheme, local enterprise offices, the Credit Review Office and the credit and counter guarantee schemes. The report also highlights the positive contribution of An Post and the credit unions to the Irish banking environment, particularly in rural and regional areas. We will continue to support the increasing role both organisations can play in the Irish retail financial landscape into the future.

Willie Penrose (Longford-Westmeath, Labour)
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It is easy for someone to get a loan when he or she does not want one. It is the people who want a loan who cannot get one. All of the organisations are lovely until someone goes to see them. They put a person through the wringer and he or she comes out with a refusal. What is the good in that? It was confirmed by the Central Bank that the State effectively had a sum of €20 billion. The figure of €170 million is not included because it is for a pilot project. The sum would be only a few million euro. It would not be risk capital. There were to be two pilot schemes, one in Mullingar and the other in north Dublin.

The Department of Finance let the mask slip when it stated in the report: "Furthermore, there is significant evidence to suggest that the Irish banking sector has become increasingly more stable from a capital and funding perspective, and that relative to Ireland's European peers, that there is additional capacity to meet demand for lending to Irish SMEs and households." This is blatant propaganda on behalf of AIB and Bank of Ireland. We all know what the banks are masters of, and it is not processing loan applications or ensuring SME loan applications even occur. I know what they did to people; they wiped them out over €5,000 and €10,000 overdrafts. They tried to sink the whole place yet the Minister of State is protecting them. What would the late General Seán Mac Eoin, a great Fine Gael man, the Blacksmith of Ballinalee, say to this? He would rise up in revolution and he would tell them where to go. The Minister of State should take inspiration from figureheads like that from Longford and Westmeath.

I am disgusted with this. The Department of Finance went too far in praising the banks and, as a result, it revealed its true agenda. In conclusion, the report states: "Nevertheless, the two Departments recognise that the concept of local public banks has its merits and both Irish Rural Link and SBFIC believe that it has the support of many key stakeholders, including private investors." What is the Government going to do to facilitate the credit unions and An Post in regard to developing public banking to serve rural Ireland, disadvantaged communities and small businesses? Fine Gael is still in hock to the banks. It should call them off. It made a mess of the whole thing. It did not sell off when it should have sold off, and now it is down billions and it is trying to protect their capital shareholding and everything else. The dogs in the street and the ordinary people know what is happening, and they do not accept this type of gibberish from the bureaucrats. The Minister of State should tell the bureaucrats what he thinks of them and shake them up.

Michael D'Arcy (Wexford, Fine Gael)
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The Government recognises there are a number of positive principles underlying the concept of local public banking in general. It is committed to commissioning independent external evaluation of other possible ways in which the public bank concept could be promoted in Ireland. This could be by means of an online platform, leveraging the Strategic Banking Corporation of Ireland, the post office and-or the credit unions, or by other means. This could avoid any replication of existing Government support for bodies such as the post offices and the credit unions, which are already providing some financial and banking services in rural and regional areas. It is important to see how what is already in place can be most effectively used to support rural and regional economies and SMEs.

The Government will continue to engage with other interested parties and stakeholders, such as Ireland Rural Link, on this issue by way of a stakeholder forum. Details of this stakeholder forum will be announced shortly. There is a commitment to continue to work with An Post and the credit unions in regard to the development of the provision of financial and banking services provided by them to retail customers and SMEs, particularly in regional and rural areas. In addition, it is also important that SMEs are aware of the range of financial and non-financial supports available from the Government and its agencies. Enabling Irish SMEs to create employment and to contribute to economic growth remains an important Government priority, as well as supporting rural and regional economic growth and development.