The Co-operative Bank has revealed more details about what is going to happen to its banking operation. Which? helps you to decipher the consequences.
What’s happening to the Co-op Bank?
The Co-operative Bank is having to raise some money, around £1.5 billion, to meet the Prudential Regulation Authority’s capital requirement. This will mean a change in ownership of the banking operation.
Investors who bought bonds in the Co-operative Group’s banking arm, including US hedge funds, will be given 70%. The Co-op Group is contributing £462 million (or around 30%) to the deal.
The 30% shareholding will, in effect, provide The Co-operative Group with a controlling majority. No other single investor will own more than 9.9% without regulatory approval.
Why is this happening?
A rescue deal has been needed to fill a £1.5 billion hole in the bank’s finances. Despite having a controlling majority, The Co-op Group will lose overall control of the bank.
The bank’s troubles have been linked to the purchase of the Britannia Building Society in 2009 and the abortive attempt to purchase hundreds of branches of Lloyds bank.
What will it mean for the branch network?
The deal will mean that around 50 of its 324 branches are to close. It hasn’t revealed how many jobs will go among the company’s 9,000 staff.
Investors must now vote to back the plan and if they don’t it could fall into state hands through the resolution process.
Is the Co-op still going to be an ethical bank?
Customers have raised concerns about the bank’s future ethical direction with the change of ownership. The bank has responded with the following:
‘For the first time ever, the Bank’s ethical code will be protected by writing it into the constitution, making it legally binding. An independently chaired Ethics Committee will be a sub-committee of the Bank Board.’
What will it mean if I’m a Co-op Bank customer?
Whether customers are unhappy with the new arrangement remains to be seen. The Co-op Bank is currently a Which? Recommended Provider for bank accounts, but if its customer score does decline it will potentially mean that this is no longer the case.
The new switching service will mean that if you do want to change your bank account provider, it is now much quicker and easier than it used to be.