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Co-op Bank up for sale: what should I do?

The Co-operative Bank, the ethically focused bank with four million customers, has put itself up for sale, four years after it announced it had a £1.5bn black hole in its finances.

The bank has struggled to recover since 2013, when it pulled out of buying more than 600 branches from Lloyds Banking Group and revealed that it had suffered huge losses after its merger with Britannia Building Society in 2009.

It is now looking for a potential buyer, with speculation that TSB could be interested.

But if you’re one of the four million people who hold a bank or savings account, mortgage or credit card with the Co-op Bank, what does this mean for you? Find out in Which? Money’s guide.

Why is the Co-op Bank up for sale?

The main reason for the sale is centred around the bank’s need to build up additional capital – money set aside to provide a cushion against any losses it might make in the future. It says that record low interest rates have made this tough.

This means that the bank’s plans to recover from the huge financial hole is taking far longer than expected, and it believes a sale is the best way to build its capital.

A fifth of the bank is currently owned by the Co-op Group – which owns 2,500 supermarkets, as well as offering insurance, funeral plans and legal services. The rest is owned by a variety of hedge funds.

What does this mean for Co-op Bank customers?

At the moment, nothing is changing – the bank has only just announced plans to sell. But the decision to sell and new ownership could have an impact on people holding:

  • Current accounts – the bank offers three current accounts, which include a main current account, a student account and a basic bank account
  • Savings accounts – the bank offers a variety of Isas and savings accounts
  • Credit cards – the bank offers a 24 month balance transfer credit card, a low-rate credit card, a cashback card for Co-op members and a range of charity credit cards
  • Mortgages and loans

The bank has not announced any major changes to the terms of these products, nor do we know how they might be affected once a buyer for the bank is found.

Is my money safe with the Co-op Bank?

The bank says that it is on track to exceed its capital requirements, and that customer money is not at risk.

Like all banks, up to £85,000 of customer deposits are protected by the Financial Services Compensation Scheme.

However, it’s worth noting that Britannia and Smile share a banking authorisation with the Co-op Bank, which means you’ll only be entitled to a total of £85,000 of FSCS protection even if you have savings with more than one of these brands.

Find out more: Who owns who in banking – use our unique tool

Is my insurance affected by these changes?

While the Co-op Bank offers car and home insurance to its customers, the insurance business is actually part of the Co-op Group, which is a shareholder in the bank. The Co-op Bank is an introducer to Co-operative Insurance.

The insurance business is not owned by the bank, and therefore unaffected by the sale announcement made today.

The same can be said for the funeral plans and legal services the Co-op Group offers to customers.

Find out more: Best and worst car insurance – find the right provider

Should I switch my Co-op Bank savings or current account?

That is down to you. The Co-op Bank’s ethical values are important to many people, which it says makes it stand out from the rest of the banking industry. It refuses to do business with firms that are involved in industries such as weapons manufacturing, contribute to climate change or are involved in animal abuse.

It remains to be seen, however, what impact the sale of the bank to a new company will have on its ethical approach. The bank says that it wants to ‘preserve our ethical position’ with the sale.

The bank currently offers as much as £176 in the first year when you switch to its current account and has a Which? customer score of 69% – the fourth highest of all the banks we rate.

Find out more: Best and worst banks – discover how they’re rated.

What will happen to staff who currently work at the Co-op Bank?

The bank released a statement today saying: ‘It is too early to say precisely what the impact on our colleagues will be. We are committed to keeping colleagues and customers informed of any material changes that will affect them, when this becomes clear.’

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