It was a dark day for the co-operative movement yesterday when bondholders led by US hedge funds Aurelius and Silverpoint took majority control of The Co-operative Bank.
The Co-op Bank came into being in 1872. Owned by its members, it started life as the CWS Loan and Deposit Department. Nearly 100 years later, in 1971, it was made a wholly-owned subsidiary of CWS (now The Co-operative Group). But yesterday’s deal, which saw an earlier ‘bail-in’ plan scrapped, means the Co-op Group will now hold just a 30% stake.
Although CEO Euan Sutherland did his best to spin it on a video message to staff and customers (“As a group, The Co-operative retains effective control of the bank. We have secured 30% of the equity which makes us the single largest shareholder” and “We are embedding The Co-operative principles into the constitution of the bank”) it brings 141 years of co-operative ownership to an end.
That move was described today by former Co-op Group CEO Peter Marks as a “tragedy”.
Speaking in front of the Treasury Select Committee to explain why the bank’s deal to acquire 632 Lloyd’s Bank branches in April this year collapsed, he said: “Hedge funds exist to maximise profits, to be ethical you can’t do that. It’s not a Co-op, is it?”
He’s right. Just like the society’s food business, the Co-op Bank’s unique selling point was its ethics and values – the only UK high street bank with a customer-led ethical policy. Because of that USP, it attracted a very loyal customer base. Whether those customers will be as keen to stay on now the bank is majority owned by hedge funds, will be very interesting to see.
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