When a postal bank is closed

The Irish Postbank, jointly owned by An Post and BNP Paribas, will close by the end of the year. The chairman explained that “the unprecedented circumstances in which the financial services sector finds itself, the highly competitive savings market within Ireland and the absence of a perspective of profitability in current market circumstances” led to this decision.  The chief executive added that “the Irish savings market was loss-making since it is extremely competitive and you have to put it in the context of the ECB rate at 1 per cent: the market here is paying a significant premium over that”. Numerous press articles were written following this decision.

One, in the Irish Times by Fintan O’Toole, highlights people’s feelings when a postal financial institution closes. In his opinion, Postbank is being allowed to close because it is not considered of “systemic importance” unlike other banks being rescued in the collapsing Irish financial system. Mr. O’Toole writes that “with 450 million euros deposits, 70,000 savings and 35,000 current accounts, 90,000 insurance policy holders and 10,000 credit-card customers, Postbank does what banks used to do – provide financial services for ordinary people in their own communities”. As O’Toole adds “as it operates through a thousand post offices, it is particularly important in towns, villages and working-class urban areas that have long since been abandoned by the main banks”. Yet “none of this is considered to be of systemic importance to the economy”. In order to be defined as such “Postbank would have had to plead with every glamber and hustler to please, … it would have had to bamboozle its investors by cooking the books and lending chosen customers the money to buy its own shares”, underlines O’Toole. And he concludes “if Postbank had concentrated on these goals instead of getting stuck in the pathetically old-fashioned rut of helping ordinary people manage money, it would have been systemically important”.

Among other vibrant reactions, the one of the chairman of the Irish Cattle and Sheep Farmers’ Association (ICSA): “since Postbank opened they have built up a customer base of 170,000 in mainly rural areas”, and “in some cases, those who would not have had a bank account in the past went to Postbank because of ease of access to the service through their local post office”, before adding that “the closure will not only have an impact on rural jobs but is also a reduction in services available to rural communities”. We learnt that “the closure would have particular relevance for the farming community, many of whom opened Postbank accounts to receive electronic subsidy payments from the European Union”.

Other articles also fear that “the recent Exodus of Halifax and Postbank from Ireland will erode choice and competition in the banking sector, with mortgages and loans becoming more expensive, banks charging higher fees, slashing the interest paid on savings and becoming less alike to offer sweeteners in a bid to hold on to, or win, customers”.

Postbank is a 50-50 joint venture between the Irish Post and BNP Paribas, born out of an initial deal with the failed Belgian bank, Fortis. So far, no candidate is known to take over the business and partnership with the post office.

Full article by Fintan O’Toole.

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