Co-op says ethical principles will survive bank’s bailout
editor:
0131-620 8462 Co-operative Group has insisted that its troubled banking arm will retain its ethical approach after agreeing a rescue deal that will see the mutual left holding just 30 per cent of the lender.
With control passing to hedge funds and other investors such as pension funds and insurers, fears were raised over the bank’s stance, but euan Sutherland, the group’s Scots-born chief executive, pledged that “co-operative principles” were being embedded in its constitution.
He added: “this is the first bank to be rescued, and to survive as a standalone entity, without taxpayer money.”
However, andre Spicer, professor of organisational behaviour at Cass Business School, said: “History suggests that, once a mutual bank is privatised, it drops the focus on doing good to focus on doing well for shareholders.”
an original bailout plan, which would have seen the group retain a majority stake in the bank while floating a chunk of its shares on the stock exchange, was torn up after bondholders pressed for a better deal.
trading in the lender’s bonds was suspended yesterday as it thrashed out proposals that will see the bulk of its shares fall into the hands of bondholders, including institutional investors and US hedge funds, as it tries to plug a £1.5 billion black hole in its finances.
Several thousand retail investors, such as pensioners, who invested an average of £1,000 each in the high-yielding bonds, are expected to be handed income-paying bonds following a campaign against an initial plan that would have seen them take heavy losses.