The Co-operative Group’s CEO Euan Sutherland has moved to reassure its members the society remains “fundamentally strong” despite its recent banking woes.
In a letter sent to the society’s members, Sutherland said that although The Co-op was “far from realising” its full potential the new management team had “a very solid platform from which to build future success”.
On the society’s recent decision to shore up the £1.5bn capital shortfall in its banking business with a ‘bail-in’, Sutherland said: “As many of you will have read or heard about, along with the banking regulator, we have identified that our Bank requires additional levels of capital to protect us against current or future risks. Although we are not the only bank facing this challenge, this has led to considerable media coverage and I’m acutely aware that the news may have been unsettling for some of our members and Bank customers.”
“The solution we have come up with balances the long-term interests of our members and investors, giving all the opportunity to benefit from the potential future upturn in the Bank’s fortunes”
Euan Sutherland, Co-op
He added: “Our management decision-making and democratic governance have also been questioned by some and The Co-operative brand, and all it stands for, has clearly been affected in the short term. I want to assure you that, as group chief executive, I do not take this situation lightly, and as a member of The Co-operative, I’m sure you don’t either.”
Acknowledging that some of the society’s bondholder investors were unhappy about the proposed exchange of their bonds into shares, Sutherland said: “In developing our plan, we wanted to avoid two options that we believe would be unwelcome to all concerned.
“Firstly, we wanted to avoid selling off further Group businesses which would be to the detriment of the Group’s future sustainability and not in the best interests of our members. Secondly, we wanted to avoid having to resort to seeking support from the tax payer. This last option would likely have resulted in our bondholders losing all or most of their investments.
“The solution we have come up with balances the long-term interests of our members and investors, giving all the opportunity to benefit from the potential future upturn in the Bank’s fortunes and the long-term sustainability of the Group as a whole.”
And he added: “I joined this business because I recognise the importance of the values it holds dear and the unique contribution that the consumer-owned co-operative movement can bring to the British economy. I’m convinced that we are far from realising our full potential but I know that we have a very solid platform from which to build future success.”
Earlier this month, The Co-op announced the launch of an independent review into how its banking business ended up with a £1.5bn shortfall.
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