Willie Penrose (Longford-Westmeath, Labour)
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101. To ask the Minister for Finance the engagement he has had with an organisation (details supplied) in respect of the public banking investigation; and if he will make a statement on the matter. [30913/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Programme for a Partnership Government contains a commitment to “thoroughly investigate the German Sparkassen model for the development of local public banks that operate in well-defined regions”. My Department and the Department of Rural and Community Development were tasked with fulfilling this commitment. As the Deputy will be aware, the Report on Local Public Banking in Ireland has now been approved by Government and was published last week.

The Report contains a detailed analysis of a proposal for a possible means of implementing the German Sparkassen model of local public banking in Ireland. This proposal was provided by Irish Rural Link and the Savings Bank Foundation for International Cooperation (SBFIC), who are the international development wing of the Sparkassen Group. Officials from my Department and Minister Ring’s Department met with representatives from Irish Rural Link and SBFIC to discuss their proposal on numerous occasions.

Ultimately, the report found that there is not a compelling case for the State to establish a new local public banking system in Ireland in the proposed form. The proposal was for 8-10 local public banks, starting with a pilot local public bank in the Midlands. There are a number of challenges relating to the assumptions underlying the business model for a local public banking system that was proposed in the report. These include assumptions regarding the estimated total cost to the Exchequer and estimated interest rates and loan attrition rates. Similarly, the suggested locations in the proposed pilot in the Midlands would overlap with existing banks, credit unions and post offices.

The cost to the Exchequer for the proposed new model is estimated at a minimum of €170 million. The Government is committed to reducing its shareholding in the banking sector and encouraging a more competitive, private market. There is, however, no impediment to any interested parties separately pursuing the establishment of a system of local public banks, in a manner that does not involve Exchequer funding or State ownership. Indeed, the Government would encourage any potential new market entrants to engage with the Central Bank of Ireland and the Department of Finance in relation to this matter.

The Government is committed to continuing to engage with interested parties and stakeholders, such as Irish Rural Link, further on this issue by way of a stakeholder forum. Details of this stakeholder forum will be announced in due course.