Co-op bank for sale

Chapuys

I believe I read somewhere that the Coop Bank were trying to acquire TSB to gain the TSB balance sheet to help with their monetary problem.

I have finally started to close down my main bank account with Smile and switch.

antrobus

Chapuys wrote: »

I believe I read somewhere that the Coop Bank were trying to acquire TSB to gain the TSB balance sheet to help with their monetary problem.

I have finally started to close down my main bank account with Smile and switch.

The Co-op Bank was negotiating with Lloyds Bank to buy 632 bank branches, aka Project Verde. After the collapse of this deal, Lloyds floated off these branches as the TSB.

The rumour is that it was Lloyds that discovered the true extent of the Co-op's problems whilst doing their due diligence and blew the whistle. Allegedly.

antrobus

JSmith321 wrote: »

If the Co-op Bank goes to Bank of England for "Resolution" does anyone know of any other bank that has undergone this process and if so, what was the impact on customers or is it simply "business as usual".

I had a look at what happened to the Dunfermline Building Society.
http://news.bbc.co.uk/1/hi/scotland/7971244.stm

Within 48 hours of going into Resolution, the Nationwide had "bought the Dunfermline's retail and wholesale deposits, branches, head office and most of its residential mortgage book". It was "business as usual for all customers".

So it was relatively painless from the customer's point of view.

King_Of_Fools

antrobus wrote: »

I had a look at what happened to the Dunfermline Building Society.
http://news.bbc.co.uk/1/hi/scotland/7971244.stm

Within 48 hours of going into Resolution, the Nationwide had "bought the Dunfermline's retail and wholesale deposits, branches, head office and most of its residential mortgage book". It was "business as usual for all customers".

So it was relatively painless from the customer's point of view.

I would suggest that resolution would probably be the best outcome for customers. The investors would lose their money but the bank accounts would be sold at face value to a stable financial institution without the existing liabilities.

If the bank was sold, the investors will be wanting to maximise their return (or minimise their loss). Whoever buys it would inherit the existing liabilities and will need to cover these by extracting value from their customers.

Zanderman

This article from the Guardian suggests that things (i.e. potential for a buyer) may not be as bad as the BBC story implied (yet!).

https://www.theguardian.com/business/2017/mar/24/co-operative-bank-says-it-has-interest-of-several-credible-buyers

Thrugelmir

JSmith321 wrote: »

If the Co-op Bank goes to Bank of England for "Resolution" does anyone know of any other bank that has undergone this process and if so, what was the impact on customers or is it simply "business as usual".

HBOS. The Treasury lent Lloyds £25 billion in order to keep HBOS afloat. Afterwards there was a whole raft of measures to maintain liquidity levels within the UK banks. While the banks themselves came to terms with the situation.

antrobus

Thrugelmir wrote: »

HBOS. The Treasury lent Lloyds £25 billion in order to keep HBOS afloat. Afterwards there was a whole raft of measures to maintain liquidity levels within the UK banks. While the banks themselves came to terms with the situation.

The Treasury might well have lent HBOS £25 bn, but that was before the Banking Act 2009, and not an example of Special Resolution. As far as I can establish, the only bank to have gone to Resolution was the Southsea Mortgage & Investment Company Limited. (It was a very small bank, based in Portsmouth, and it went straight to liquidation. No one much seems to have noticed.)

http://www.bankofengland.co.uk/archive/Documents/historicpubs/news/2011/060.pdf
http://www.bbc.co.uk/news/business-13791168

Resolution is a specific process created after the 2008 crisis to enable the BoE to deal with the failure of banks and other financial institutions that avoids the need for any 'public subsidy'. Or that's the idea, anyway. Whether it would be applied if a systemic bank got into trouble again I do not know. Fortunately the Co-op bank is not a systemic bank, so that is not a concern, and no reason for the Treasury to open its wallet.

System

Thrugelmir wrote: »

HBOS. The Treasury lent Lloyds £25 billion in order to keep HBOS afloat. Afterwards there was a whole raft of measures to maintain liquidity levels within the UK banks. While the banks themselves came to terms with the situation.

It wasn't a central bank resolution and the funds weren't just for HBOS as LTSB needed some liquidity too x

PeacefulWaters

SPalin wrote: »

It wasn't a central bank resolution and the funds weren't just for HBOS as LTSB needed some liquidity too x

I think about 95% of it was for HBOS though.

Stuart_W

Chapuys wrote: »

I have finally started to close down my main bank account with Smile and switch.

I reckon it is worth hanging on in there for another few weeks to see what happens. Co-op/smile customers have been remarkably loyal so far. If a "change" is forced upon them, there may well be some incentives offered to avoid many walking and going elsewhere.

It may be a choice between choosing who switch to and being told who is going to take over the account, many may prefer to choose, or any sense of "loyalty" towards the Co-op is lost once it isn't the Co-op. The new owners, whether that is of the whole bank or certain assets, will need to give customers a reason to stay put.