DUBLIN, Ireland–Exploratory talks on a potential partnership between Germany-based Sparkasse and Ireland’s credit unions could begin within weeks, after the German community bank promised it could introduce low interest rates for both mortgage and SME borrowers.
According to the Independent, Sparkasse has issued an invitation to credit union officials to meet the German bank to discuss its proposed new Irish banking model. As CUToday.info has previously reported, Irish CU officials have indicated they are open to the discussions, which are aimed at helping credit unions expand their offerings, especially in mortgages.
Sparkasse is a not-for-profit bank with €1.1 trillion in assets. It has proposed establishing eight regional public banks in Ireland, starting with a pilot bank in the midlands of Ireland with up to five branches. The midlands bank would have a capital need of between €15 million and €20 million, with the entire network of eight separate banks costing between €150 million and €200 million, a senior Sparkasse executive told the Independent.
"I do not see any reason why mortgages in Ireland should be more expensive than in Germany," Niclaus Bergmann, managing director of Sparkasse's international arm, told the Independent.
In Germany, Sparkasse offers long term mortgage loans at 3% interest rates and 10-year fixed mortgage rates of 1.1.1%.
"We are talking about competitive interest rates. We have an approach which is not shareholder-value driven. It is not about earning money but fulfilling a task," Bergmann told the Independent.
But Bergmann also made it clear in the interview that Sparkasse's role was to provide expertise rather than to put up the required funding. McGuinness said he had discussed the plan with senior people in the credit union and that they are "open to the idea,” the Independent reported.
"If the credit unions decide that this is a good idea they could capitalize any one of those banks. The credit unions have a fund of €7 billion that is deposited in the main banks at the moment and that could be used to capitalize any of the Sparkassen type banks around the country," he was quoted by the Independent as saying.
McGuinness said he hoped the proposed meeting could "move things forward" and that the next step could be to bring the Department of Finance and the Central Bank to the next meeting.