The RDS will be hosting a conference on alternative banking models, focusing on the German 3-Pillar Banking System. The presentations will focus on the development and operation of the German Sparkasse banks and how to re-introduce that model of banking into Ireland. The Sparkasse banks focus on SME lending and form the backbone of the German banking system, especially in economically depressed regions and were a key part of the transition of the old East Germany.
Key speakers will be:
Prof. Eoin O’Dell, TCD Law School
Topic: How to create an Irish legislative environment for Sparkasse-style public mandate banking.
Dr. Karl-Peter Schackmann-Fallis, Executive Member of the Board of the German Savings Banks Association
Topic: The Roots of German Local Banking, and its Future.
Mr.Heinrich Haasis, President of the World Bank of the Savings Banks, The Chairman of the Board of the Sparkassenstiftung für internationale Kooperation
Topic: Think global, act locally, cooperate internationally! How Sparkassen style banks have been introduced around the globe to benefit SMEs and the local community.
The event will be chaired by former TCD Economics Professor and Senator Sean Barrett.
Dr. Barrett was a member of Joint Oireachtas Inquiry into the Banking Crisis. Dr. Barrett will chair the conference and provide a closing comment on how the failures of 2008-13 could have been avoided and the need for a new approach to banking in Ireland.
Registration for the event is here: http://www.rds.ie/Whats-On/Event/26638
What: Conference on the German 3-Pillar Banking Model
When: 16 November 2016, 10h00-15h30
Where: The Royal Dublin Society (RDS) Library, Ballsbridge
6 replies on “Conference on the German 3-Pillar Banking Model, RDS, 16 November 2016”
“..how to re-introduce that [Sparkasse] model of banking into Ireland.”
I had no idea we ever had such a model. We’ve long had a model which rips off households and small businesses and boosts lending to property. The triple (fscal, property, banking) blowouts curtailed the property lending but the rip-offs are even more intense as they’re now focused on just two “Pillar Banks”.
Having a conference on introducing Sparkasse banks in Ireland is purely displacement activity; it avoids concentrating on the necessary reforms of the existing model to reduce the rip-offs and to make it more supportive of productive activities.
The Irish structures were provident societies during the 19th century. The 1844 Joint Stock Company Act allowed Irish banking to develop down a different track to the Continental models. The 1720 Bubble Act resulted in the banking establishments prior to the mid-19th century being essentially unique bodies sanctioned by royal charter or private act of Parliament. Some of the peculiar aspects of that history continue with the special section of the new Companies Act to accommodate the operation of the Court of the Bank of Ireland.
No banking model works under ZIRP AFAIK
Banking needs a time value of money
What’s the difference with the Spanish model? How did that work out?
It didn’t because the rules were changed allowing the Cajas to operate outside their regions cf.
http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=28761
Page 4
As we will see
below, the regional principle has made a sizeable
contribution to the success of Sparkassen. By way of
comparison, in 1988, the abolition of the regional
principle which had governed the Spanish savings
banks, or Cajas, increased competition in the banking
sector. Later, the bursting of the real estate bubble,
against a background of excessive borrowing and a
concentration of risk on the books of these same Cajas,
caused a serious shock to these institutions.
Page 7
“The Sparkassen clearly offer a successful model. Their
intimate knowledge of their customers, their responsible
lending policies and their conservative risk management
all contribute to this. But their success is also based on
distortions of competition, that have persisted for many
years, which deprive German commercial banks of
recurrent revenue streams. Moreover, their business
model could be hard to transplant to economies with
structural features that are very different from those of
Germany. Lastly, the climate of persistently low interest
rates could eat into their profitability.”
There must, however, be only benefit from learning how they work, even if they are tailored to German economic structures. The underlying rule would appear to be (i) create the economic – mainly manufacturing activity – and (ii) organise a local bank to finance it. Trying to do it the other way round is not recommended.
In terms of other banking models to follow, the one most often quoted is that of Handelsbanken cf.
http://www.bankasysla.is/files/Stability%20and%20Profitability%20in%20%20Banking%20NIELS%20FINAL_257725513.pdf
That starting a successful business, whether in banking or any other sector, is the easy part, keeping it successful being the difficult bit, is borne out by Handelsbanken’s recent difficulties and its decision to fire its CEO (who had closed down some 60 branches).
Most Irish banks once operated something on these lines in that considerable discretion was given to branch bank managers. Those were the days!