Co-op bank admits failing to attract customers switching accounts
5 Nov 2013:
Bank makes admission in documents released to encourage bondholders to back rescue plan to plug £1.5bn capital shortfall
Bank makes admission in documents released to encourage bondholders to back rescue plan to plug £1.5bn capital shortfall
The Co-operative bank
also warned that it could face a significant VAT bill once the group's
ownership falls to 30%. Photograph: Christopher Furlong/Getty Images
Co-operative bank has admitted losing out in the war to attract
customers switching current accounts, striking another blow to the
government's attempts to foster competition on the high street.
The bank – in the throes of receiving a £1.5bn lifeline from hedge funds and the wider Co-op group of supermarkets, funeral homes and pharmacies – said there had been a "material reduction" in the number of people moving their accounts to it since the seven-day switching service was introduced in September. Co-op said its rivals had been advertising the new service heavily.
In thousands of pages released to encourage bondholders to back the rescue package, the Co-op also admitted it is likely to design share-based bonus schemes for its bosses after its shares are floated on the stock market next year. The Co-op Group is to give up full ownership of the bank under the rescue deal.
The bank also warned that it could face a significant VAT bill once the group's ownership falls to 30%. This is because it has service arrangements with the group.
Because of its ethical policy, the Co-op bank has been regarded as a major competitor to the big four – Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC – and a potential winner from the switching service which promises to move a current account in seven working days without any errors.
Euan Sutherland, the boss of the Co-op Group, has said the bank's 7.3 million customers have remained loyal since the announcement in June that it had been ordered by the Bank of England to find extra capital to be found to bolster its financial strength. The Co-op bank lost £1.4 bn in deposits from corporate customers after its credit was downgraded to junk status in May.
The former chairman of the bank the Rev Paul Flowers is likely to face questions today from MPs about assertions that its financial position was strong in 2012, just weeks before regulators unearthed the £1.5bn capital shortfall. He is due to appear before the Treasury select committee on Wednesday.
The Co-op Group said it was co-operating with the Financial Conduct Authority (FCA) and the accounting body the Financial Reporting Council (FRC) which are looking at the bank's statements about its capital position in its 2012 annual report. The group made clear that inquiries are at a preliminary stage and are not a formal investigation. The FCA declined to elaborate, while the FRC said: "We are making inquiries into the Co-op's financial reporting in accordance with our normal procedures. If we commence a formal investigation we always issue a press announcement."
A group of bondholders - which hold class of bond known as upper tier 2 bonds - have come out in support of the complex rescue offer, which if it fails could force the bank into the control of the Bank of England and possibly nationalisation. Holders of 15% of these class of bonds have said they back the offer.
COPY http://www.theguardian.com
The bank – in the throes of receiving a £1.5bn lifeline from hedge funds and the wider Co-op group of supermarkets, funeral homes and pharmacies – said there had been a "material reduction" in the number of people moving their accounts to it since the seven-day switching service was introduced in September. Co-op said its rivals had been advertising the new service heavily.
In thousands of pages released to encourage bondholders to back the rescue package, the Co-op also admitted it is likely to design share-based bonus schemes for its bosses after its shares are floated on the stock market next year. The Co-op Group is to give up full ownership of the bank under the rescue deal.
The bank also warned that it could face a significant VAT bill once the group's ownership falls to 30%. This is because it has service arrangements with the group.
Because of its ethical policy, the Co-op bank has been regarded as a major competitor to the big four – Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC – and a potential winner from the switching service which promises to move a current account in seven working days without any errors.
Euan Sutherland, the boss of the Co-op Group, has said the bank's 7.3 million customers have remained loyal since the announcement in June that it had been ordered by the Bank of England to find extra capital to be found to bolster its financial strength. The Co-op bank lost £1.4 bn in deposits from corporate customers after its credit was downgraded to junk status in May.
The former chairman of the bank the Rev Paul Flowers is likely to face questions today from MPs about assertions that its financial position was strong in 2012, just weeks before regulators unearthed the £1.5bn capital shortfall. He is due to appear before the Treasury select committee on Wednesday.
The Co-op Group said it was co-operating with the Financial Conduct Authority (FCA) and the accounting body the Financial Reporting Council (FRC) which are looking at the bank's statements about its capital position in its 2012 annual report. The group made clear that inquiries are at a preliminary stage and are not a formal investigation. The FCA declined to elaborate, while the FRC said: "We are making inquiries into the Co-op's financial reporting in accordance with our normal procedures. If we commence a formal investigation we always issue a press announcement."
A group of bondholders - which hold class of bond known as upper tier 2 bonds - have come out in support of the complex rescue offer, which if it fails could force the bank into the control of the Bank of England and possibly nationalisation. Holders of 15% of these class of bonds have said they back the offer.
COPY http://www.theguardian.com
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