The former Bank of England economist and senior policy adviser for the Council of Mortgage Lenders, and former head of building society and housing research at UBS, said ownership of the bank was at odds with its mutual background and was “divorced from its ethical roots”.
He said: “The question is whether the Co-op Bank can sustain this image, and it is odd that the Co-op Group is in bed with the hedge funds regarding the ownership of the bank.”
Mr Thomas suggested further recapitalisation of the bank would dilute further the group’s 30 per cent shareholding, but he said “now may not be a good time to sell as it won’t get a good price”, despite the Co-op Group’s own much publicised financial difficulties.
His comments came as the bank plunged into further crisis last week with the revelation that it will continue to post losses for at least another two years.
The embattled bank’s delayed annual report and accounts revealed losses of £1.3bn for 2013 and warned that it would breach its minimum capital requirements without the additional injection of £400m in capital to cover additional expenses related to past misconduct and poor documentation.
The bank’s 277-page annual report and accounts revealed its current capital ratio of 7.2 per cent was just over the minimum permissible of 7 per cent.
Co-op Bank chief executive Niall Booker admitted the bank’s liability management exercise, which resulted in the Co-op Group ceding 70 per cent control of the bank to external investors, after a £1.5bn capital shortfall had been exposed, had kept the bank alive in 2013.
However, he added: “There continued to be significant issues, which need to be resolved.”
With disgraced former bank chairman Rev Paul Flowers admitting in a recent TV interview to have “sinned”, Mr Booker said the bank would claw back almost £5m in bonuses to former board members.
However, Mr Booker is set to receive £4.6m for his first 18 months in the job, including £1.7m for 2013, compared with predecessor Barry Tootell, who was paid £595,000 in 2012.
As part of the bank’s rescue plan, Mr Booker said it had closed 51 branches in 2013 and expected a further reduction of around 40 this year, while full-time employee numbers fell from 7780 in 2012 to 6704 in 2013.
He added that the bank’s drive for an additional £400m investment would “enable us to reset this starting point and continue with the execution of our original business plan, which remains unchanged”.
The report stated the bank’s strategic priorities were to return to community banking, retain its “commitment to ethical values and principles”, doing fewer things better and supporting small businesses.
Meanwhile, trade union Unite has written to the Co-operative Group’s regional board members urging them to back reform, and have warned that they see no viable ‘plan B’ with recent “public politicking” putting the livelihoods of its 1200 members and the Co-op’s future at risk.
The letter said: “The future of the Co-op is not just about the make up of the board. It is about the families of thousands of workers whose futures are on a knife edge.”
| A group in crisis |
Ahead of the publication of its own accounts which are expected to announce losses of up to £2.5bn, the Co-op Group has been rocked by the resignation of Lord Myners as a senior independent director, citing criticism from entrenched opposition from Co-operative members. Lord Myners’ resignation follows that last month of former group chief executive Euan Sutherland, who called the Co-op Group board “ungovernable”. Lord Myners, the former Labour City minister, came under fire for his proposal to reform the group’s structure, with some stating he wanted to change the group’s governance to something akin to a public limited company. The Midcounties Co-operative, which represents almost 9,000 members, rejected the plan, leading Lord Myners to resign. The group had committed to paying a balance of £263m from an aggregate of £333m to the Co-op Bank as part of the deal that saw the bank recapitalised last autumn – a sum on which the bank’s annual report claimed it was “dependent”. In an open letter to members, Lord Myners said: “Those who call my proposals a plc model do so to deceive. The changes I am proposing are designed for, and to suit, the co-operative ownership model.” |
