Co-op Bank

samj1967

Should people be worried and move accounts

pmduk

Not if they have less than £85k in there. But you should never keep more than that in a single institution anyway.

The usual warning that it's always best to have an account with a second institution applies here, but again applies with all bank accounts..

thenudeone

During all the recent troubles, the UK government and regulators have never let ordinary account holders (<£85k balances) suffer and have always found a way to keep all the mechanics (debit cards, cash machines etc.) working as normal even though their bank may be technically solvent; and I don't think they're going to allow it to happen now.

I wouldn't worry.

Hominu

samj1967 wrote: »

Should people be worried and move accounts

Its only happening because they were offering £200, £150, £100 to anyone who opened a new current account with them, so they got millions of applications, and then 3 months later most people closed the accounts again and took the gift with them.

(or it might have nothing to do with that)

Anthorn

The only group of people who stand to lose out currently are bond holders who are subject to an equity exchange. But it could be argued that a bank which cannot meet its financial obligations is due for nationalisation!

What's at stake is a 1.5bn deficit which was first pointed out to them by the FSA during the Lloyds/TSB affair when the Co-op was forced to pull out of the deal to take over branches Lloyds/TSB were dumping. That doesn't appear to have changed and there is still £1.5bn short, around half of which being a write-off of Britannia bad loans.

So overall the bank isn't doing too well but it's still in business. A recent announcement states that the bank will be transformed into a "community based retail focussed" bank but what that means is anyone's guess and we all wait with some measure of anticipation.

So anyway, if you're a bond holder hard luck. But if an account holder you're covered up to £85,000 total over all accounts so hang fire and see what the Co-op pulls out of the hat.

http://www.youtube.com/watch?v=kR39TOQh1bw

CLAPTON

as a matter of principle one should close your accounts.

Poc

Interested to hear why Clapton thinks 'that as a matter of principal people should close their accounts.' Genuinely dont see what the problem to be principled about is.

Thanks

pmduk

Barclays need to bolster up its accounts as well for precisely the same reason, are you suggesting their customers should walk as well?

opinions4u

Poc wrote: »

Interested to hear why Clapton thinks 'that as a matter of principal people should close their accounts.' Genuinely dont see what the problem to be principled about is.

Thanks

For me it comes down to Britannia PIBS.

These were issued to capitalise a safe regional building society that was little more than a savings and mortgage company.

They were marketed to personal savers rather than institutional investors, albeit at a higher rate than a normal savings account. But they had a cuddly "safe" feel about them (although there were health warnings on them).

The Britannia then played the ill-advised game of chasing growth through commercial lending. They messed up and had no choice but to "merge" with the safe and ethical Co-op.

The Co-op, under the leadership of the old Britannia big chief, then carried on as if the problem of Britannia's commercial loan book would disappear over time. Despite the rather obvious signs that a similar (larger scale) problem at HBOS had destroyed the bank, nearly sucking Lloyds TSB in to the abyss with it.

When, four years later, it becomes clear that the problem isn't going to go away a chunk of the bill for the mess is being passed on to individuals who invested their savings in to PIBS. They were never shareholders. They almost certainly didn't recognise the situation that has arisen as being remotely possible.

And yet the Co-op Bank continues to trade on it's ethical approach to life. While screwing these individuals in to the ground.

So while I would argue that the £85k FSCS umbrella provides protection to the ordinary saver, I could well understand those with ethics and principles moving their money elsewhere.

Page 11 of the link below explains the risk factors pointed out in 1992. Later pages tell you what a low risk business Brtiannia Building Society is.

https://docs.google.com/file/d/0B8hzbUJuMAkqMl8xVDFIVFJVc0E/edit?pli=1

Arthur_Sleep

I have been a Co-operative Bank customer since 2000 with various products, including credit cards and a current account for all that period.

Earlier in the year I decided that, as a matter of principle for some of the reasons that opinions4u has very clearly outlined, I would be transferring my business elsewhere.

However, in response to the OP, you have precisely nothing to worry about (unless (a) you are being shafted by the rescue plan, or (b) hold more than £85K, as has already been discussed).

Anthorn

Let's look at the facts:

The bank has until the end of the year to get its finances in order.

The bank will float on the stock exchange with The Co-operative Group as its major shareholder.

Bond holders which include institutions will get a take it or leave it equity exchange for their bonds in order to raise capital in addition to capital coming from The Co-operative Group to clear its deficit. The equity exchange plan is to be released at the end of October, 2013.

If the bond holders do not accept the equity exchange the bank will go under.

Even if the bond holders accept the equity exchange the bank will not be profitable for several years so dividends will be very low or non-existent. But that doesn't mean that the share price will not rise.

If the bank goes ahead and floats, account holders could be offered shares. But account holders are not entitled to free shares because the bank itself is not a mutual so shares will have to be paid for at the going rate.

If the bank goes under it will likely be nationalised and/or sold off so account holders could be moved to a different bank. In that case they could end up with an account which is better than if they shopped around and moved accounts now.

Money is safe up to £85,000 total across all accounts due to FSCS insurance. So the only real reason to move money is if you have over that amount with the Co-op Bank.