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Your cheque's in the post

Douglas Fraser | 19:12 UK time, Tuesday, 29 September 2009

Banking in crisis? Too many local Post Offices closing?

Gordon Brown offered a similar and highly attractive response in his Labour conference speech: get the Post Office network to provide bank services.

It's such a smart idea that the Post Office has already thought of it, and offers a range of savings and mortgage products. Bosses have announced it's looking at offering a current account as well.

The catch is that it's being offered through the Bank of Ireland, in a deal hatched in the pre-crisis days when Irish banking was riding high.

So would this be building up an Irish bank to bolster a Great British postal institution?

And at the expense of the British banks still struggling to get back onto their feet, only propped up for now by the UK Government?

That would be a strange outcome from the current contradictions in banking policy, to add to the "be more prudent, but lend more freely" mantra.

The Chancellor, Alistair Darling, has talked about proactively encouraging more competition into British banking, and the Bank of Ireland could be his way of achieving that.

Yet on the contrary, Stephen Hester, chief executive of the Royal Bank of Scotland, was telling a banking seminar in London on Tuesday that he foresees consolidation in the sector and fewer competitors.

Comments

  • Comment number 1.

    This is not a new idea as Tony Benn introduced through the Poast Office the Girobank which proved succesful but i believe was sold for £1 by Thatcher in a purely ideological move which was of no benefit to anyone but the bank in question i think this being Alliance & Liecester.

    Steve

  • Comment number 2.

    Good point about the scandalous giveaway of Girobank (just as it was making money!). Its also worth noting that the Communication Workers Union and the Compass thinktank has had a Postbank proposal on the go for a wee while (see the CWU or Compass websites). The idea would be to use the infrastructure the Government and the Post Office already own, rather than have the Post Office have to enter into any more dealings with the Bank of Ireland for instance. I think this is more likely to have been on the mind of the Prime Minister when he made the speech than the Post Office doing deals with the Bank of Ireland.

  • Comment number 3.

    Clearly, the government needs to increase the supply of mortgages on the High Street...it only owns Bradford and Bingley, Halifax, Northern Rock, Bank of Scotland .....so what it should obviously do is sell Irish mortgages in competition with itself.

    Is it just me or is this beyond barking?

  • Comment number 4.

    Although I believe the existing crop of banks are of little real benefit to anyone other than their management and their mainly institutional shareholders the idea of doing a deal with the Bank of Ireland is completely bonkers.

    That said we have to remember that Alistair Darling told the Financial Times when he was first appointed that he didn't believe in "economic patriotism" so we perhaps shouldn't be surprised by this.

    However - the New Zealanders have been operating a post office owned bank for a long time. See here https://www.kiwibank.co.nz/

  • Comment number 5.

    # 4 What a great idea Wee-Scamp. I like the ethos and they are offering great rates as well.

    One question, what could we call it?

    HaggisBank or GrouseBank spring to mind for the the Scottish branches or would we have to think British like Gordon?

    On a more serious note, is this not a U Turn in as much as the policy has been to run down the post office network and make it try to become anything but a post office, depriving communities of a vital service.

    In which case is this a serious plan or a short term manifesto pledge that they might not have to (or be able to from the opposition benches) fullfil.

  • Comment number 6.

    The only person who has suggested a deal with the Bank of Ireland to create the Postbank is Douglas Fraser.
    Isn't everyone here getting a wee bit carried away?

    Its a straight-forward pledge, which could do some good if it comes to pass, and can be easily done without any deals with any banks.

  • Comment number 7.

    # 6 The deal with Bank of Ireland is already in place, what is being suggested is an expansion of the services to include other products. If the government or Post Office sought other partners there would be a considerable degree of upheaval.

    Why do they need another bank you might ask? It keeps down costs and the "expertise" is already there. It is difficult and not necessarily best value to set up your own bank, Standard Life did it and it is up for sale Prudential did it via Egg and tried to sell it for years before offloading it to CitiBank.

    The latest newcomer to the world of banking is Tesco, now there`s a thought if the two tie up, Tescobank, tescopost tesco stores on every town and village high street

  • Comment number 8.

    The deal is not in place to provide a Postbank. A deal has been in place with the Bank of Ireland for years to help provide other, peripheral services, not the Postbank.

    The do not need to seek other banks to provide Postbank, as we already have the infrastructure in place. We already have the expertise, if the government would join up its own enterprises, and work with local credit unions (this part is already happening in some areas and is successful)

    Have a look at the Postbank proposal put forward by the CWU and Compass.

 

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