CompaniesMay 29 2013

Co-operative’s troubles cast doubts on PRA

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Speaking after the bank announced it was to cease all new business lending, the director of Hertfordshire-based Barretts Financial Solutions said: “We will never know how bad the situation is at the Co-operative as it seems the industry has closed ranks to pre-2008 levels.”

This is the latest in a line of problems for the bank, which ditched plans to buy 632 Lloyds Banking Group branches in April. This was followed by a downgrading by credit ratings agency Moody’s in May.

It has been reported that the bank is suffering capital shortfalls of between £700m to £1.8bn. A spokesman for the bank refused to comment on the speculation.

The bank’s chief executive Barry Tootell, who it is understood received a £263,000 bonus in 2011, and a £595,000 salary in 2012, resigned shortly after the downgrade. Chief financial officer Steve Humes, who it is understood took home a salary of £577,000 and a £9000 performance bonus last year, left his post last weekend.

When asked whether its 8m UK customers should be worried, Mr Barrett said: “We don’t know whether there will be a run, but a lack of panic suggests that the situation is under control.

“Unlike the run on Northern Rock, this situation, while still shocking, appears to have been handled with a lot less fuss.

“But I would ask why this happened again? Did the regulator fall asleep at the wheel?”

Meanwhile, Niall Booker, who headed HSBC’s operations in North America, is to take over from Mr Tootell and has pledged to turn the situation around.

Mr Booker said he would focus on strengthening the bank’s balance sheet and “satisfactorily resolve” its “underlying issues”. It is understood the bank may be seeking to claw back bonuses.

Mr Booker added: “There are no quick fixes here but with the support of the group, our staff and our loyal customer base, I am confident we can stabilise and develop the franchise.”

When asked whether it had been holding urgent meetings with the bank, a spokesman for the PRA said: “The PRA speaks with regulated firms regularly, across the organisation.”