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Uncharted Waters

Oct 11

Written by:
11/10/2017 12:49  RssIcon

Shaun Fensom tells us about the next steps for the Co-op bank and the Customer Union 

 

The last remaining link between the Co-operative Bank and its former owner, the Co-operative Group, has been broken.

This follows the re-capitalisation deal that was finally agreed in September – providing the bank with the extra £700m it said it needed to meet regulator requirements and create a solid footing for the future.

 

The Coop Bank

 

The deal also resolved the tricky problem of how to separate the liabilities for the joint Co-operative Group and Bank pension fund. The upshot was that the Co-operative Group, which until late 2013 owned 100% of the bank, had its shareholding reduced to just 1%.

Then we got the news that the Co-operative Group had sold its 1% shareholding – for £5m (an interesting indicator of the market value post deal). Formal links between the two organisations will continue until 2020, but this symbolic break ends a story lasting 145 years – from the foundation of the bank by the Manchester Co-operative Wholesale Society.

The sale also points to a flaw in the argument of those calling for the bank to be stripped of its co-operative name: it wasn’t a co-operative in the first place. It wasn’t owned by its customers or its workers. It was an asset of the Co-operative Group so that, when the time came, the last remnant could simply be sold off.

I used to think that this was unimportant, that being owned by a co-operative was what made it a co-operative bank. But the seven principles of the International Co-operative Alliance, universally accepted as the definition of a co-operative, make it clear that co-operatives have members, who own at least some of the assets and exercise democratic control over those assets. That was never the case with the Co-operative Bank.

Now, with a new lease of life and renewed confidence, the bank is arguing that what matters most is how it behaves: its application of ethics (based on co-operative values) and its support for the co-operative movement – for example its £1m funding for co-operative development.

 

Image: Ethical Policy

 

There’s some truth in that. But the aims of the Customer Union and the Save Our Bank Campaign are both to ensure that the bank sticks to its ethical principles, and to see an eventual return to some form of co-operative ownership and control. While it may never have been a co-operative, that doesn’t mean it can never become one.

In the next month, members of the Customer Union will vote whether or not to approve the re-capitalisation deal. If the answer is yes then we’ll need to plan how to move forward with our two aims.

The bank has restated its commitment to ethics with an advertising campaign celebrating 25 years since it led the way by adopting an ethical policy. The real test of that policy over those years has been the business that the bank has turned down on ethical grounds, and its mechanism for monitoring and reporting on this. 

Now the bank wants to lead again by developing positive ethical policies – what it wants to invest in, as well as what it won’t. The Customer Union could have an opportunity to help decide that new direction.

 

 

With no part of the bank in co-operative hands, the aim of increasing the co-operative stake may seem harder to achieve than ever. But wait: one tiny part of the bank does remain in co-operative hands, the minuscule shareholding owned by the Customer Union. If members vote to approve, the Customer Union will need to decide how much effort to put into growing this stake, or whether to focus on building institutional co-operative ownership when the hedge funds sell up – in line with the preliminary research by Ethical Consumer.

We’ll be deciding on our next steps at our second gathering in Manchester on 18 November, where members and supporters will also be able to attend by web. 

You can book your place on the Save our Bank website, we hope to see you there. 

 


 

 

 

 


 

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