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Fresh blow for borrowers as Postbank shuts

CONSUMERS have been dealt a blow with the closure of Postbank -- as it emerged that the country's banks have effectively stopped lending.

Postbank, the finance company operating in about 1,000 of the country's post offices, is to pull out of Ireland.

This will mean even less competition at a time when lending has almost dried up.

New figures from the Central Bank have revealed the extent of the credit crunch.

According to the statistics, lending plunged by €3.2bn last month alone -- the lowest level since the recession hit 18 months ago.

At the same time, new spending on credit cards -- at €732m -- was the lowest monthly figure since the end of the boom. Total lending to business was 149bn -- down 5pc since last June.

The mortgage lending drop was less sharp -- €147bn, or down 0.7pc. Total loans to households were down by 0.5pc during the month.

Some of the overall drop has been put down to borrowers being put off by a depressed economy. But the decline ties in with claims that banks are reining in lending.

The figures were released just as the Nama rescue plan was given the green light by the European Commission.

Meanwhile, Postbank is the second retail banking business in as many weeks to announce its closure following the decision of Bank of Scotland (Ireland) to shut down Halifax, with the loss of 750 jobs.

Fine Gael TD Kieran O'Donnell said the closure showed that the Government's bank strategy was "unravelling".

Postbank, a joint initiative between An Post and French BNP Paribas Fortis which opened Irish operations in April 2007, will wind down its business by the end of the year.

The Financial Regulator said An Post savings accounts will not be affected by the move.

Postbank which has 170,000 customers and employs about 260 people said it hoped most of the jobs could be saved. It will not be accepting new bank customers from Monday.

Thierry Schuman, Postbank board chairman, said the company faced the toughest banking environment in history.