A Local Public Bank would be a locally focused bank with a public mandate to serve the community in its region by providing finance and other modern banking services to the real economy.
There remain weaknesses in the existing banking system in Ireland as the remaining pillar banks struggle to overcome the legacy issues they still have. This is particularly obvious in the on-going problems with the mortgage market. The banks still have higher than desirable level of Non-performing loans (NPL), which increases the capital they must put aside to cover this risk and in turn feeds into the mortgage pricing. There is also a distinct lack of competition in the traditional retail banking sector in Ireland.
The Green Party's proposed model is based on the Sparkassen banks in Germany, however the principles of the model of bank being proposed are general ones and allow for a specific Irish model to be devised according to our requirements. These banks would also have an important public mandate that would aim to provide money and credit services to all and thus will support financial inclusion. This also allows the bank to promote savings and to support increased financial literacy among its customers.
A business model that is not profit orientated: The bank must have profits in order to survive and grow but the core goal of the bank is to create value and sustainability for their communities.
A defined regional basis: The bank has a clear geographical area within which it operates, which allows it to gain in depth knowledge of their area and build lasting relationships within their communities.
A decentralized, network structure: Each bank would be independent with decisions taken locally. Jointly the network would own a Service Provider that would allow efficiencies and uniformity to products, costs and controls.
A stakeholder model: the public ownership allows model to avoid focusing on shareholder value and speculation and instead focus on the real economy.
These banks would also have an important public mandate that would aim to provide money and credit services to all and thus will support financial inclusion. This also allows the bank to promote savings and to support increased financial literacy among its customers.
As a population in the region of 300,000 is necessary to make such a bank viable, 8 to 10 such small banks would form an Irish network. The estimated equity requirements to set up a system of 8 banks and the Service Provider is €170m. As a publicly owned model this would be state funded, although it could be supplemented by other sources