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Should An Alternative Public Banking System In Ireland Be Considered?

Published on 14 April 2021 at 13:05

In recent weeks, there has been an increase in calls for an alternative public banking system to be introduced in Ireland to deliver local community banking. This comes with the closure of Ulster Bank and Bank of Ireland branches across the country in recent months. 

 

According to TheJournal.ie, ‘public banking falls between the private commercial banking model and the credit union sector… These banks are regional and customer-focused rather than profit-focused’. Businesses would be offered loans, similar to commercial banks, ‘but with more favourable terms… Business loans would include leasing contracts and export financing… Mortgage customers could get a fixed rate for five, ten or 15 years’. 

 

However, an Indecon Report in 2019, found that there was no need for a public banking system to be implemented in Ireland. According to The Irish Times, despite the Indecon Report concluding that there was no business case for the introduction of community banking, it recommended ‘support to the credit union market to deliver an expanded range of community banking services and noted An Post’s mooted expansion of its banking operations’. 

 

The Green Party wants the Indecon Report to be bypassed as there have been changes in the banking sector since these recommendations were published in 2019. Most notably, the closure of bank branches across the country. The idea of public and community banking has had support from Dublin Central, Green Party TD, Neasa Hourigan and the Green Party. 

 

In a Green Party paper that was published by Deputy Hourigan in March 2021, argued that the ‘Green Party believes that a public bank would be a locally focused organisation with a mandate to serve the community in its region by providing finance and other modern banking services to the real economy’. Deputy Hourigan argued that, ‘the time has come for some action on public banking from the government’. The Cork Green Party are holding an event on the importance of community banking on Thursday, the 15th of April, at 7pm to discuss this further. 

 

Public banking is also supported by backbench Fianna Fáil TDs, John McGuinness, Marc MacSharry and Willie O’Dea. John McGuinness ‘called on Micheál Martin to set up a public banking system with An Post and the credit unions’. Sinn Féin has also expressed interest in community banking. 

 

Sinn Féin MEP, Chris MacManus pointed out that ‘public banking exists in 21 European countries and many more across the world… The German Sparkasse Bank and the New Zealand Kiwibank are two such examples and have proven to be a huge success and very popular among citizens of those countries… The main focus of these banks isn’t on maximizing shareholder profits but rather benefitting the communities that they serve’. MacManus also pointed out that ‘the Credit Unions and Post Offices have an important role to play in this, and the failure to sufficiently expand the financial services provided by them has minimized their growth and profits’. 

 

Whilst the Indecon Report suggests otherwise, the Irish banking sector has changed since these report findings were published in 2019. The enhancement of local community banks in Ireland, would fill the gaps vacated by the closure of other private bank branches. Community banks would shift the focus to local communities, as opposed to profit maximization. In order to implement his public banking model effectively it must involve the likes of credit unions and post offices. 

 

However, despite the idea of public banking having significant support from the Green Party and some support from Fianna Fáil in government, it is unlikely the third coalition partner Fine Gael would support the idea, having dismissed the idea in the 32nd Dáil, following the findings of the Indecon Report. It is uncertain what a post COVID-19 economy will look like, so it is still to be seen whether a community banking innovative will be on the government’s agenda.


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