People’s Bank vs end of free banking

Peter Mandelson is reported to be “warm” about the suggestion of a using the Post Office network for a British “People’s Bank”, which would offer essentially a full banking service. This would also have the benefit of deflating criticism of the British Government’s plans to sell off/more fully privatise Royal Mail.

I find this an intriguing proposal for two reasons. One, it would provide a public alternative to the perennial discussion on retail banks ending free banking. This topic has come up again, in a report commissioned by the lifestyle consultancy, White Concierge. The report’s author, Merlin Stone, is a professor at Bristol Business School. Mr Stone was interviewed today on BBC 5 Live:

Considering the loss of trust by the public in the banking system, I would have thought any suggestion by retail banks to eliminate free banking would be a suicide move.

Furthermore, as we Northern Ireland customers are well aware, the four main retail banks make what are suspected to be excess profits within Northern Ireland, which at the moment is having the effect of providing a (relatively small) partial relief on their massive overall losses. Again, I would expect the Consumer Council to express outrage at any attempts to obtain even more profit income from Northern Ireland customers.

My second intrigue is about which bank would be selected to provide the banking services at the Post Offices. The Bank of Ireland currently have a contract with Royal Mail, and would be the likely provider. But interestingly, as it is an Irish-domiciled business, the guarantees on customer’s deposits are provided fully now by the Irish government (and no longer even partially by the British government). This is no problem in itself, just in the worse case scenario of a complete collapse of BoI and/or Irish government confidence, with British customers wondering why their British government aren’t responsible for honouring their deposits.

Overall, I am receptive to a banking service provided through the Post Office. Yet someone else has observed that this already existed? Remember Girobank, which was ultimately sold off to Alliance & Leister? For any revived Post Office banking system, I would like to see some greater commitment by the British government (to ensure that this is an ongoing concern). Indeed, I would expect those who live in rural areas, those threatened by Post Office closures, to demand it.

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