Co-op fights to keep bank’s ethical crown

CAMPAIGNERS have attacked the Co-op Bank for abandoning its roots over a rescue plan which will hand US vulture funds a 99pc stake.

The lender has been battling to plug a black hole in its finances, and abandoned a sale this week after no compelling offers were received.

This deal will see hedge fund investors take a larger stake in the bank and pump in nearly £700m to keep it afloat.

But critics argued the lender should lose its co-operative status and be treated like any other large corporation.

Members of the public who are bondholders face losing 55pc of their cash under the rescue plan.

Labour MP John Mann said: ‘The Co-op Bank is clearly no longer a co-operative and must be renamed. Anything else would be misleading to customers.’

The bank is already 80pc-owned by American hedge funds which saved it in 2013.

Its traditional owner the Co-op Group kept 20pc but this will now be slashed to 1pc. A relationship agreement which saw bank services promoted to Co-op members will also end.

The split raises questions about whether the bank is still a true co-operative as it is no longer controlled by members.

However, the bank’s chairman Dennis Holt insisted it was still an ethical organisation which was worthy of the name.

‘Being a co-operative is all about behaviour, it’s about values, it’s about ethics, and that’s embodied in the DNA of this bank and the owners are fully committed to that,’ he said.

The Financial Conduct Authority and Department for Business will decide if the lender can still call itself a co-operative. Neither would comment yesterday.

Ed Mayo, secretary general of Co-operatives UK, said: ‘We welcome the new capital agreement for the bank. We will continue to monitor and review our approval for the use of the name.’

The rescue will see £443m raised by asking bondholders – who are mostly the same hedge funds which own the lender – to swap debt for shares. Another £250m will come from the sale of more equity to existing investors.

Holt would not say how many retail bondholders would be affected. However, it was announced that anyone with a holding of under £100,000 would receive up to 45p back for every £1 they had invested.

A deal has also been reached over the £10bn Co-op Group pension scheme, which the bank has been partly responsible for.

The 90,000-member plan will be split in two, with the bank shouldering responsibility for 21pc of assets and liabilities.

Bosses have pledged to pump in £100m over the next decade to handle the scheme’s deficit.