The Co-op Bank, which discovered a hole in its finances in 2013, has put itself up for sale. What does that mean if you’re already a customer or are thinking of switching?
Q. Why has Co-op Bank put itself up for sale?
Co-op Bank has put itself up for sale because it’s not been able to strengthen its financial position in the way it needs to. It is currently largely owned by hedge funds based in the Unites States although the Co-operative Group owns a 20% stake in it.
In 2013, the Co-op Bank admitted that it had a black hole of £1.5 billion in its finances. Several of the management team resigned and two have since been banned from holding senior banking positions. Co-op Bank warned in 2015 that it would continue to make a loss until the end of 2017. Last year it lost over £600 million, and last November it announced that 200 jobs would go.
Q. Who will buy the Co-op Bank?
A. I’ve read reports that the TSB may be interested in buying Co-op Bank but we may not know which financial companies are interested in buying it for some time. Other names that have appeared in the press include Virgin, Clydesdale Bank and One Savings Bank.
The bank has four million customers and over a hundred branches, which could make it appealing to a bank that wants to extend its presence in the high street. However, at the height of its popularity, after the financial crisis, the bank had over 4.5 million customers.
Q. I’m with the Co-op Bank. Should I move my account?
A. Whether you stay with the Co-op Bank or move has to be a personal decision. The Co-op Bank is covered by the Financial Services Compensation Scheme (FSCS), which means that any savings you have up to £85,000 are covered if the bank were to fail.
If you’re happy with the service and the products, you might be better off waiting to see who buys the Co-op Bank and, if necessary, moving then.
Q. Will the Co-op Bank continue to have its ethical policy once it’s sold?
A. At this stage it’s impossible to say. A buyer could see the Co-op Bank’s ethical stance as differentiating it from other banks, or it could seem like an additional cost.
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