Battle of the pocket-books

Dec 20th 2005 | BRUSSELS AND PARIS
From The Economist print edition

The post office gets a new banking arm. It may get unwelcome competition too 

FOR a decade France's big banks have been demanding the right to offer the Livret A, the country's most popular saving plan and the exclusive domain of La Poste, the state-owned post office, and Caisse d'Epargne, a mutual savings bank. The banks may at last be making progress. Even though on December 21st the European Commission is expected to approve, against their wishes, the launch on January 1st of a bank owned by La Poste, Neelie Kroes, the competition commissioner, will continue to consider whether the distorts the French banking market.

Jean-Paul Bailly, boss of La Poste, announced his plans for a bank, called La Banque Postale, in November 2004. Yet BNP Paribas, Société Générale, Crédit Agricole and Banque Fédérale des Banques Populaires waited until the French banking regulator approved the new venture on November 30th before complaining to the commission. They knew they had little chance of stopping the bank's launch, but thought they might open the Livret A.

The banks say that the 17,000 post offices will join a market that, with 26,000 bank branches, is already full. They also claim that La Poste will not charge its banking arm enough for its infrastructure and that the pensions of the new bank's 1,000 employees will be subsidised by the state. They also say they would charge the government only 0.8% commission for running the Livret A, against La Poste's 1.3% and Caisse d'Epargne's 1.1%.

The Livret A, which dates back to 1818, is a tax-free account held by three-quarters of French people and containing almost one-fifth of their savings. Caisse d'Epargne runs 24.5m accounts, with 67 billion ($80 billion); La Poste has 21.6m, with 47.5 billion. There is no minimum deposit; the maximum is 15,300. Savers get 2% interest and can pay in or take out money as they wish. Deposits are channelled to the Caisse de Dépôts et Consignations, a state-controlled bank, to finance social housing.