Co-op Bank: Mutual or Bust?
Since the appalling news of a Co-op Bank takeover by US hedge “vulture” funds (Aurelius Capital and Silver Point Capital) a growing body of Co-op members and bank customers are rallying to restore co-operative control and underpin the bank’s commitment to ethical investment.
Background
The future of the Co-op Bank has been in doubt since announcing losses arising from the acquisition of the Britannia Building Society. Once the government made clear it would not bail out the Co-op Bank its credit rating shattered and the vulture funds bought up Co-op debt – interest-paying bonds at a lot less than the face value of £940 million.
Question: Which institutional investors sold out, and which banks put up the money for these asset strippers?
The Bank of England (Prudential Regulatory Authority) requires reduction of Co-op Bank debt of around £1bn by the end of 2013 and another £500mn in 2014 to cover likely Britannia losses.
Current Status
Last week the Co-op board announced it had no option but accept the vulture funds’ demand for a controlling equity stake – worth much more than £940m – in exchange for their Co-op Bank bonds followed by stock market floatation in 2014.
The Co-op Bank said “failure to implement the recapitalisation plan may lead to regulatory intervention… & may even result in the bank no longer being able to continue as a going concern.”
Question: Would intervention be such a bad thing, and why preserve a bank co-operative in nothing but its name?
The Bank of England said “The BofE is in a position to rescue Co-op Bank, its depositors and core functions as a going concern, while forcing holders of £1.3bn of its bonds and preferred shares to provide the needed additional capital, should that be necessary”
We say…
Proposed Action
We need to beat hedge fund vultures at their own game and buy their pot of Co-op debt for a fraction of its £940 million face value. The price will be reduced as fast as Co-op deposit account-holders withdraw their money whilst leaving their accounts open. The vulture funds financed their bids with loans and we too could seek low-interest loans from unions, churches, charities and sympathetic pension funds (even state institutions and local authorities by responsibly utilising funds from the BofE’s next round of QE).
Meanwhile, the Co-op board are scheduled to announce their recapitalisation plans by the end of October 2013, so now is the time to pile on the pressure.
Our Demands
Any privatisation of the Co-op Banks is a clear breach of the defining Co-operative’s commitment as ‘a group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically…not about making big profits for shareholders, but creating value for customers.’
1. Divest Aurelius Capital and Silver Point Capital of any debt, equity and/or other interest in the Co-op Bank
2. Scrap plans for a Co-op Bank stock market floatation
3. Revitalise the Co-op Bank under fully mutual ownership.
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Bravo – at most we can save the Co-op Bank, at least we can make sure there’s no meat in it for vultures to pick. Of course they’ say they’ll keep it ‘co-operative’ and ‘ethical’. But if it’s in their hands with not a prior word to us, it’s no longer co-operative, and they’ll be ethical just as long as they’ve nothing more profitable to do with it.
Is there any penalty for mis-selling a whole bank?
We CAN beat the vulture funds at their own game if enough people believe in a mutual future for the Co-op Bank and co-operate together.
I’m not a Co-op bank user but I am a Co-op member. Please let me know how I can help.
Becka, keep checking on the website and let as many people as possible know via social media etc.
As a coop Bank Ac holder for 40yrs,I’ll support any feasible action(s) that will keep the Bank as a Mutual Bank.
Arvind, the key to feasible is the amount of support we can get; we are past the petition stage. Please try to pass this message on through social media etc
We will keep updating our progess both on this site and http://www.occupylondon.org.uk
I have some savings in a coop bank ISA. I joined this bank BECAUSE it is not like the others.
Now I want to draw out the funds to help save the banks mutual status. But where is the most ethical place I can keep the funds meanwhile?
Anton, Question probably should be where is the least unethical!! Nationwide is the only partly ethical bank that could handle large numbers of defecting Co-op customers. There is also Coventry Building Society and Salvation Army Bank. Choice is not great, which is why we really need to be able to save the Co-op Bank. Michael
Many co-operators at first considered switching immediately by using http://www.moveyourmoney.org.uk but now many all looking to act collectively and strategically and are working through http://www.saveourbank.coop
The Coop has not been an ethical bank for years, they had an appalling history of mis selling PPI then trying to dodge repayments and charging exorbitant bank charges which they would not refund! Surely ethics should apply to their own customers, hope it sinks without trace!
Malcolm, No doubt there is an element of rose tinted spectacles as co-op members come to terms with how far the Co-op Bank’s standard fell in the financial mayhem of the last years!!