Report finds that there is no economic case for the establishment of a State owned public banking network
The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, has today (Thursday) published an independent report by Indecon International Economic Consultants on Community Banking in Ireland.
The report concludes that there is no business case for the State to establish a public banking system in Ireland, supporting the outcome of a previous report on this issue published by the Department of Finance and the Department of Rural and Community Development in 2018.
While Indecon’s report concluded there are some areas of market failure, it noted that there is extensive provision of banking services, as well as a wide range of Exchequer funded existing supports, and that there is no case for the establishment of a new State owned banking network. Credit unions are considered to be a ‘community bank’ with an increasing offering of financial products for their members. An Post is also increasing its financial offerings and there is a significant network of post offices in areas where there is no bank branch within five kilometers.
Minister Donohoe said:
NOTES TO EDITORS
Leveraging Role of State Supports for SME Infrastructure to Address Market Gaps:
1. Continue to target rural enterprise support in future counter-guarantee loan schemes.
2. Expand Microfinance Ireland’s mandate to provide enterprise loans of up to €50,000.
3. Promotion by Local Enterprise Offices of Micro Enterprise Loan Fund.
4. Set ambitious targets for regional impact of any revised Brexit loan scheme.
5. Consider new initiatives to support expansion of SME lending by newer platforms.
Reducing Financial Exclusions and Managing of Existing Information by Credit Unions, An Post and Local Authorities:
6. Expansion of Personal Micro Credit Scheme by member-owned credit unions.
7. Facilitation of new providers to enhance access to credit in communities.
8. Development of initiatives by local authorities as part of digital strategies to assist individuals to apply online for banking services.
9. Support the Credit Union Market to deliver Expanded Range of Community Banking Services.
10. An Post to explore and discuss with its parent Government Department, NewEra, and, where appropriate, the Department of Finance, the possibility of investing in partner financial organisations, where such investment is commercially viable and where it would enhance competition in lending market.
11. Extend Exemption for New Community Banking Entrants from Notification of Charges for 5 Years.
Reducing Information Asymmetries and Building Skills:
12. Development of Technology Based Lending Tool Kit by Enterprise Ireland and Local Enterprise Offices.
13. Advisory supports by Local Enterprise Offices to include assistance with preparation of lending applications.
14. Skillnet Ireland to offer analysis of lending requirements as a component in their Management Development Programmes.
Enhanced Responsibility for Commercial Banks:
15. Commercial Banks should consider the establishment of an increased number of Community Banking Hubs or provide alternative methods of banking services delivery in areas where branch closures may have hindered access to banks.