Pin-striped postmen banking competition from France’s La Poste must be fair
French banks long feared competition would come from abroad. So they busily constructed (often with state help) defensive mergers among themselves to forestall foreign takeovers. But now, they suddenly find themselves bitten in the ankle from behind by the state itself. For the government has pushed its postal service, La Poste, into setting up a banking subsidiary as a full competitor in the lucrative mortgage market. The country’s four main commercial banks have now cried foul to Brussels about this new Banque Postale using its special advantages to distort competition.
All European postal systems are diversifying away from their traditional mail delivery business, which is in decline because of the rise of e-mail and is increasingly open to cross-border competition under European Union rules. Governments are also using electronic bank transfers rather than post offices to deliver welfare benefits. So most post offices are trying to capitalise on their large networks to sell financial services products, to the general displeasure of commercial banks.
In Japan, banks fear that the eventual privatisation of the country’s post office will unleash a formidable competitor against them. Italy’s Poste Italiane already earns half its revenue from financial services. The UK Post Office offers an increasing range of financial products, and its request to link into automated cash machine networks is opposed by UK banks. A slight exception to the diversification trend is Deutsche Post, which has built on mail delivery to become a global logistics specialist; but it, too, has created a banking subsidiary.
The competition problem created by France’s Banque Postale is probably not that it will benefit from cross-subsidisation from its state-owned parent, La Poste. The French government appears well aware that the EU competition authorities have taken a dim view of the way state ownership can lower the cost of capital below what private sector competitors have to pay. To remove such an unfair advantage, Brussels forced Germany’s regional governments to renounce the guarantees they gave their Landesbanken.
The real problem in France is rather that La Poste has a near monopoly on the sale of Livret A government savings schemes, which benefit from specially high interest rates and low taxation. Significantly, the two existing banks which also have the right to sell Livret A and similar products are not among the plaintiffs to Brussels.
The obvious remedy to create a level playing field would be either to abolish such special savings schemes or, better, to make them available to all banks. If France’s commercial banks were still to find the Banque Postale taking business off them at home, their further remedy would be to launch themselves more boldly into cross-border retail banking that is still underdeveloped in Europe.
