Rescue Co-op Bank from hedge funds, urge campaigners
AN action group is calling for the Government to bailout the Co-op Bank to protect it from being “swallowed up by two giant US financial speculators”.
Around 30,000 people have signed up to a campaign on the website sumofus.org who want to see the Treasury intervene to protect the ideals of the Co-operative movement.
Meanwhile, the former chairman of the Co-operative Bank has told MPs that the lender was encouraged by senior Government ministers to embark on what proved to be a disastrous growth strategy.
On Monday the Co-op Group unveiled its rescue plan to stem a £1.5bn hole in its finances. Under the terms of the deal, which is yet to be approved by bondholders, the Co-op Group will end up with a 30% stake when it floats on the stock market.
The remaining 70% will be held by bondholders with around 35% belonging to Silver Point and Aurelius, two US hedge funds that have forced the Co-op Group to revise its initial plan. This envisaged bondholders taking £500m of losses on investments worth £1.3bn and the Co-op retaining between 60-70%.
Campaigner Martin Caldwell said: “If there is enough money to save giant banks, then surely there is enough to save the Co-op. Nearly every town and village in the country has a Co-op, whether it is a shop, a pharmacy or a bank. It’s at the heart of our communities and a part of our history. What makes the Co-op so unique and precious is it is owned by its members and run on ethical grounds. It doesn’t answer to greedy shareholders and it doesn’t invest our money in dodgy companies.”
He added: “Saving the Co-op is more than just saving a bank, it’s about saving the principles of the Co-operative movement – customer owned, investing ethically and treating its workers fairly. You don’t have to be a customer of the Co-op to realise there is an important principle at stake here.”
Speaking on Wednesday to the Treasury Select Committee, Rev Paul Flowers, who resigned as chairman of the Co-op Bank in June, said he had “absolutely no doubt” the lender had political and regulatory support for its 2009 takeover of the Britannia Building Society that has largely been blamed for its current woes.
Rev Flowers said shadow chancellor Ed Balls had given his full support for the Britannia deal as a minister in the then Labour government and that Co-op Bank’s abortive acquisition of 634 branches from Lloyds – known as Project Verde – had received continued support from Coalition ministers, including Business Secretary Vince Cable and Mark Hoban, the former Financial Secretary to the Treasury.
“I have absolutely no doubt that was the case,” said Rev Flowers, when asked if the bank had been given clear support for the Britannia and Lloyds deals.
“The Treasury was indicating its pleasure and support,” he said.
Rev Flowers, who admitted he has limited financial services experience, having worked for a bank for four years after leaving school, said he believed the bank’s difficulties stemmed from the Britannia deal.
“It was the Britannia book and the deterioration of that book that got the bank into difficulties,” he said.
