Post Office savers to gain UK cover

The provider of Post Office savings accounts, Bank of Ireland, is planning to restructure its British business to bring it fully under the UK regulatory system, report This is Money.

The provider of Post Office savings accounts, Bank of Ireland, is planning to restructure its British business to bring it fully under the UK regulatory system, reports This is Money.

The move, still at an early stage, would end the uncertainty over protection for the 500,000 UK savers who have Post Office accounts.

At present, they have no protection under the Financial Services Compensation Scheme, but are dependent on the Irish equivalent, underwritten by Dublin, in the event of Bank of Ireland going bust.

The country’s rapid economic decline has caused some commentators, such as Lib Dem peer Lord Oakeshott, to damn Bank of Ireland as ‘a shaky bank backed by a shaky government’.

The bank’s restructuring would see it operating as a fully authorised UK subsidiary, rather than as a ‘branch’ only lightly regulated in the UK, giving Post Office and other Bank of Ireland savers in the UK full cover under the FSCS.

Post Office Limited, part of Royal Mail, is likely to welcome the move as a solution to what has become a growing source of embarrassment.

In April, Post Office boss Alan Cook let slip in a Parliamentary hearing that he intended to launch a current account through the 12,000-strong branch network next year. This would be ‘nigh impossible’ unless issues of depositor protection were resolved, a source said.

The FSA is also believed to be backing the change. Chairman Lord Turner has said: “Depositors in one country are vulnerable to the failure of banks in another if that country lacks the resources and willingness to fund bank rescue. The situation should be reviewed.”