Bank of Ireland will benefit from the Post Office's huge network

The deal gives the Bank of Ireland - a small player in the UK personal banking market - access to one of Europe's largest retail networks.

The Post Office plans to offer car insurance, credit cards and savings accounts within 18 months.

It is also going to relaunch its home telephone services.

Seen as challenge to British Telecom, the Post Office's original home telephone option launched in November 2001 uses telephone access numbers and "router boxes" which divert calls via its offices.

"The technology of the home telephone service is under review... the Post Office is currently looking round the market for possibilities, the personal loans are part of this," a Post Office spokeswoman said.

European precedent

The Post Office has 16,500 branches which are used by an estimated 29 million customers each week.

As part of the new loan service, people will be able to borrow between �1,000 to �25,000; interest rates on the loans will range from around 8% to 15%.

"There are several encouraging examples from around Europe where a lot of post offices... have entered the financial services market... and been very successful," Patrick Waldron, who is heading the venture, told the BBC.

"It's a tremendous network in terms of size and scale... and it is very well trusted by the UK population," he added.