Coffee House

Last rites for the Co-op Bank? As group announces record losses

17 April 2014

9:15 AM

17 April 2014

9:15 AM

‘Care, respect, clarity and reassurance’ are what the Co-operative funeral service says it offers the bereaved, and the parent Co-op Group may soon find itself in need of just such support to help it come to terms with the resolution of the Co-op Bank. ‘Resolution’ is modern banking jargon for an orderly burial, involving powers vested in the Bank of England to transfer all or part of a troubled bank’s business to a private-sector purchaser, or (if the Treasury is so inclined) into temporary public ownership, or to force an accelerated insolvency procedure that ensures depositors are either paid out by the Financial Services Compensation Scheme or have transferred to healthier banks.

These last rites have not yet been publicly contemplated, but it is hard to see how else the story can end. Knocked off course by its disastrous takeover of the Britannia building society, fatally distracted by its pursuit (with Vince Cable’s pushing) of Project Verde, the purchase of Lloyds branches that never happened, the bank has a huge black hole in its balance sheet and scant hope of returning to profit. Its ‘ethical’ status has been dented by its record of mis-selling payment protection insurance. Following a recapitalisation last year, it is 70 per cent owned by a curious collection of US hedge funds whose only interest is to make a fat turn as swiftly as possible, while the Co-op Group itself, as a 30 per cent shareholder, is left with diminished influence over the bank which so dangerously bears its name.


And that stake will reduce again if the parent (which has other problems of its own, notably in the aftermath of its acquisition of Somerfield supermarkets) cannot come up with its share of an additional £400 million capital call made by the bank last month. The distinctly non-ethical consortium of banks to which the Co-op Group is heavily indebted — Barclays, RBS and Lloyds to the fore — are no doubt ready to swallow Co-op Bank’s 4.7 million retail customers between them as part of a wider settlement.

All this will come into even sharper focus with the confirmation of record group losses this week. Meanwhile in the board game of corporate survival, ‘Lord Myners parachuted in to overhaul your governance’ was probably more of a snake than a ladder in the first place; but ‘Myners’ shock resignation’ is a big, slippery, hissing PR disaster, confirming as it does what departing chief executive Euan Sutherland said last month about the group being ‘ungovernable’.

Myners — the multi-millionaire former Labour minister for the City, known according to a Spectator profile for his ‘iconoclastic views, considerable ego and ferocious temper’ as well as his ‘rich, fruity voice’ and ‘glossy’ metropolitan social profile — was never likely to hit it off with the representatives of provincial Co-operative movements who make up the group’s bloated and unbusinesslike board. Those directors are now locked in a defensive mindset which makes intervention by the Bank of England and the Treasury all the more likely in the end. The walk-on part of Lord Myners is, I fear, no more than a sideshow in the slow procession towards the crematorium of this once great institution.

This is an extract from Martin Vander Weyer’s ‘Any Other Business’ column in this week’s Spectator. Click here to subscribe to the Spectator.

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Show comments
  • you_kid

    Come on!
    HBOS, Bank of Scotland, Coutts, RBS, Bradford and Bingley, Northern
    Rock, Cheltenham and Gloucester et al would be classed bankrupt in
    similar circumstances? No kidding.

  • David Booth.

    I was a member of the “Ethical Bank” many years ago, and inadvertently became overdrawn by a princely £1-49 for 4hrs due to a late paycheque. The “Ethical Bank” charged me £25, (a weeks pay at the time) no argument or excuse was acceptable to them. I left the “Ethical Bank” PDQ.
    If anyone boasts how ethical they are count the spoons before they leave.

  • CharlietheChump

    Couldn’t happen to a nicer bunch of moralising, interfering, know all socialists. The fact that this lot was led by The Crystal Methodist says it all.

  • MirthaTidville

    Everything about the Co Op is overpriced. Its Funeral business will quote you roughly a £1000 more than an independent, due to their massive overheads and their food store prices are laughable. Corner shops can undercut them. Their bank is theirs in name only so what`s to save. The sooner it goes the sooner labour will have to find a new overdraft….oh deep joy

  • dado_trunking

    Perhaps it is now time to move all the decision-making lobbies of the bank to the safe haven that is the Square Mile – hence the up and coming socialising of losses would be faciltated by Magna Carta Socialists who have had the chance to demonstrate their expertise in such matters.
    Oh hang on . . . they have done just that.

  • Mark McIntyre

    Oneself will ‘keep the faith’ – and our membership + money with them.
    As for our funeral… ?
    Signed, Rightist Co-operator !

  • Colin56

    This is yet another example of an ill-advised acquisition – Britannia BS – destroying value in the enterprise. Think also Morrisons / Safeway. Coupled with an archaic, amateurish management structure that doesn’t mesh with today’s financial regulatory regime and you have disaster staring you in the face.
    Unfortunately, the Co-Op has over-reached itself; and by so doing may have written its own death warrant. Who will feel comfortable holding deposits in a small bank with such losses swirling round the group? I foresee queues outside branches, just as happened to Northern Rock.
    The Co-Op urgently needs to address its structural and management issues, and take notice of people such as Myners and Sutherland (who sensibly has walked away, the only direction for the remaining Board members i would suggest), otherwise it will surely go into administration and cease to exist. Leaving several prominent labour MPs in need of sponsors, btw …. The Rochdale Pioneers must be feeling very sad at this time.

    • HookesLaw

      Personal deposits are protected. It may well go into administration, but only to become ‘Virgin Money’.

  • The Laughing Cavalier

    Strangely enough, one of the debtors unable to pay back its loans is the Labour Party.

    • Erictheowl

      It’s enough to make a cat laugh!

  • Ron Todd

    If it can keep going until the next election Labour will make sure it survives no matter what the expense.

    • HookesLaw

      Do Labour consider they have any moral responsibility – having taken loans from a bankrupt bank? ‘How Much Did They know!’

      • MirthaTidville

        Labour have no morals at all,they are the real nasty party

        • Wessex Man

          Can’t agree with you there having met them at previous elections, The Lib/Dems are the really dirty party with the Tories wallowing in second.

      • Wessex Man

        about as much as you, zilch!

  • swatnan

    Oh come on! Name me a Bank which hasn’t been in hot water these past 5 years.
    And which Banks had to be bailed out by the Govt? And which Bankers were for the high jump? Has the Spectator now become a scandal sheet and mouthpiece of the Bankers?

    • El_Sid

      HSBC? Deutsche?

      It’s relevant for a political magazine such as the Speccy as only one organisation sponsors elected representatives such that its name appears on ballot sheets.

      Only one bank gives soft loans that have allowed the Labour Party to stave off bankruptcy.

      • The Laughing Cavalier

        If the Labour Party were a firm or an individual it would have been declared insolvent long ago.

    • swatnan

      The fact is The Tories and Lib Dems and UKIP are funded with dirty money.
      The Labour Party partly funded by hardworking union members, ethical banking and honest Labour membership. And the Coop Party and the co-operative movement has never really had much influence on the Labour Party at all, so don’t blame the Coops. All the Banks were in trouble; the Coop Bank was no different, but we thought for a time that it might be.

      • Colonel Mustard

        “The Labour Party partly funded by hardworking union members”

        Who had no choice in the matter.

        • Wessex Man

          Plus none of us has forgetten how well Tone entertained Donors!

      • HookesLaw

        UKIP funded with dirty money!! Oh come on, you have gone too far now!

        • Wessex Man

          Well said Hooky, your’re not all bad!

    • Wessex Man

      Oh come on! name me another Bank’s chief Executive that hired rent boys and snorted drugs and wasn’t quailifes to run a welk store yet alone a Bank!

      • swatnan

        He wasn’t Chief Exec, but the Chair of the Bank, not really qualified to be Chair as it proved, having risen from through the ‘democratic structure’, obvously flawed. We need to look carefully at the governance of the Coop Model, which needs to be tightened up with greater checks on appointments of the Board, and Chief Exec.
        As for the Grop Len ardl was Chair of Group and Peter Marks was CEO of Group. Obviously the roles they played needs looking into as well.

    • HookesLaw

      So what? Banks were poorly regulated by Brown and his poster boy (and Salmond’s) ruined RBS.

  • @PhilKean1

    Last rights for the Co-op Bank?

    At least they can use their own in-house funeral service.

    Anything that hastens the death of the outdated Labour Socialist Party can only be a good thing !

    • Liberty

      If Labour get in in the GE they will push through taxpayer funding of political parties so they won’t even need the Co-op.

      • @PhilKean1

        The Liberals want that now !

        Huhne – “British people are getting politics on the cheap”

        • Wessex Man

          Well he is a specialist at trickery.

    • Mark McIntyre

      The Liebore Co-operative Party – RIP – with our blessing !

  • zanzamander

    Co-op group is big on demonising, deligitimising and boycotting Israel and therefore by default giving succour to its detractors like terrorist group Hamas, AQ etc. As such, I am over the moon that this business is going belly up.

    • Holly

      I must admit I found myself reading the sorry tale with a smile on my face.
      The fact that Labour bods lurk in the background makes it so much more enjoyable to read.

    • HenryWood

      Yes indeed, just a couple of years ago I read about the Co-op’s decision to boycott Israel and I *immediately* closed my accounts with their Smile Bank and encouraged other family members and friends to do the same. Many followed suit.
      When the Bank sent me a note asking why I was closing my many accounts after so many trouble free years, I told them:
      “You boycott Israel, I boycott you!”
      It was with a sense of schadenfreude that I watched the Co-op collapsing some couple of years later.
      I wonder when the conspiracy theories blaming “The Joos” will all start up?

    • mikewaller

      I, too, think that boycotting Israel was distinctly OTT, but I do not think that your sheer joy at the possibility of the Co-op going bust does much to help your cause. There is a widespread perception that, to Israel and those who support it, its interests come first through to last. There are 10s of thousands of livelihoods involved here and your not giving a toss about those seems strongly to confirm that perception.

      Another thing that seems generally to be missed is that it wasn’t old style Co-op managers who wrecked the business. For the most part it was fifth-raters brought in from the private sector who did that.