Future ‘bail ins’ need to include of all investors: Taber

A statement by the Co-operative Bank confirmed yesterday (17 December), that 97.6 per cent of its larger creditors, including US hedge funds represented by the LT2 bondholder group, had submitted their votes for the bank’s recapitalisation plans, with 99.9 per cent voting in favour.

The vote was the fourth and final to be taken among various bondholder groups, and removed one of the final obstacles to a £1.5bn restructuring which will see the Co-operative Group cede 70 per cent control to external investors in the bank.

Subject to the high court sanctioning the scheme of arrangement today, the bank will be refinanced. However, speculation continues as to its future business model, with the prospect that it could even lose its name as a co-operative under the new ownership structure.

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Despite the turmoil of the past year, Mr Taber, who represented around 15,000 pensioners and retail investors, claimed that the recapitalisation plans proved that banks could be rescued without the vast taxpayer outlay which rescued Lloyds Banking Group and RBS.

However, he also warned that any similar plan in the future would need to be structured with all stakeholders.

Citing comments from chancellor George Osborne last week to the Treasury Select Committee, that the “bail-in” had succeeded without recourse to taxpayer money, he called for retail investors to be given the same information as other groups.

He said: “It is important that the opportunity to learn lessons for the future is not missed.

“There are more than 200,000 retail holders of UK bank and building society subordinated bonds and preference shares, and every such financial institution has a number of issues which are primarily held by thousands of pensioners and other retail investors.

“The reaction of bondholders to the Co-op’s original Plan A for recapitalisation of the bank without bondholder consultation showed that voluntary ‘bail-ins’ need to be structured consensually.

“It is, therefore, only possible to achieve consensual or voluntary restructurings, and only if all stakeholder groups, including retail investors, have representation in restructuring negotiations and are given the same access to information as other groups of investors such as institutions and hedge funds.”