Saturday, 23 February, 2019

Britain's Co-op Bank agrees £700m rescue package

A Co-op bank sign A Co-op bank sign
Nellie Chapman | 29 June, 2017, 09:04

Dennis Holt, the Co-op bank's chairman, said the deal was "a great outcome" for the lender's four million customers that ensures it "can continue as a viable stand-alone entity".

The debt-for-equity swap means that the Co-op Group's stake in the bank will fall from 20% to about 1%.

The bank and the group have also agreed to separate their respective sections of the Co-operative Pension Scheme (Pace).

The bank - which put itself up for sale in February - said that despite the tiny stake owned by the group, its "name, brand and commitment to cooperative values, set out in its ethical policy, will continue unaffected".

If the bank had failed to find a buyer or agree a rescue package, it would have posed a first test of powers granted to the Bank of England after the 2008 financial crisis ― allowing it to intervene in a struggling bank and unwind it in an orderly way.

The lender, which is majority-owned by USA hedge funds, put itself up for sale in February but scrapped the plans in favour of raising capital from existing investors.

Britain's Prudential Regulation Authority said in a separate statement it had accepted the plan, but that implementation of it would be subject to further approvals. "Our investors share our commitment to building our distinctive ethical franchise and see strong future growth potential for the Co-operative Bank".

Co-op Bank has been under what the regulator calls "intense supervision" in recent months and today the Bank of England welcomed the announcement.

Co-op Bank nearly collapsed in 2013 after the discovery of a £1.5 billion black hole in its finances and it was forced into a painful debt-for-equity swap, leaving it majority-controlled by USA hedge funds.

"Unite will be meeting with the chief executive this week to seek assurances on what the deal will mean for our members in the long term, including job security assurances and pension protections".