Sparkasse German Lender’s new mortgage model for Irish Market

Sparkasse, Germany’s community oriented bank wants to bring its new mortgage model to Ireland and they believe it could play a major role in solving the current housing crisis.

Germany’s largest bank, Sparkasse, wants to create an alternative to the major commercial banks, particularly in regional towns. The European Investment Bank has indicated support for the €200m project, said Sparkasse. That support is conditional on the proposal receiving political backing in Ireland. So far, this has been slow to materialise, it is understood.

Sparkasse has issued near half of German mortgages at rates well below the standard Irish rates. This would make Ireland an ideal location for its municipality owned, non profit model, but will competition regulators allow this?

The bank has been running in Germany for 200 years and it targets SMEs and the middle segment of the market. The bank employs 300,000 staff in hundreds of branches countrywide, it is part-owned by each local authority. Each regional bank operates and lends in its own area but is backed by a central organisation providing shared services, IT and banking transaction support.


Sparkasse mortgage lender

Supporters of the proposal believe it would provide an ideal middle ground between the troubled credit union sector and the two big Irish commercial banks.

Sparkasse has made a proposal to the Irish League of Credit Unions that they could avail of the central shared services system if it is established.

But invitations issued by the German organisation to the Departments of Finance and Rural Affairs to see how it operates in Germany have so far been turned down. Both departments said that the idea, mentioned in the Programme for Government, will be dealt with in a report which is being prepared.

Sparkasse was asked by the German finance ministry in 2008 to establish a community focused banking model in Greece and was subsequently approached to do something similar in Ireland. It is currently dealing with the Greek government but has struggled to gain similar traction here.

Harald Felzen, project manager for Sparkasse, who is due to appear before the Oireachtas Finance committee in October to explain the model, said: “Our proposal is to establish up to 10 Sparkasse in Ireland as well as a central service provider to develop a very sustainable banking model.”

The German bank would have no financial interest in the Irish off-shoot but would provide support for its establishment.