The Co-operative Bank Statement

Dear Member,

Further to the note below this one, which was posted in October 2013, the Board of Shared Interest is encouraged to note that the Co-op Bank successfully completed the main element of its process of recapitalisation just before Christmas. The link below to the Co-op Bank's website shows the full statement from the organisation about this:

http://www.co-operativebank.co.uk/news/2013/131220-completion-of-bank-liability-management-exercise

For Shared Interest this mitigates the immediate, recent concern of a major financial failure of the Co-op Bank.

Looking forward, the Society is now carefully considering the options in regard to our optimal banking partner. On the one hand the fact that the Co-op Bank is no longer controlled by a mutual organisation reduces its long-standing fit with Shared Interest. We do note however, the strong intention now enshrined in the Bank's new Articles of Association, which state:

"The Company shall….promote and conduct its business to the extent practicable in a manner informed by the established values of the co-operative movement, having regard to the highest standards of ethical principles and with the aim of being recognised as a good corporate citizen and contributing to building a stronger and sustainable society".

We would remind members that the ideal banking partner would combine very strong ethics with financial security and attractive pricing. In practice we have, of course, to accept a degree of compromise on some of these elements and look for the optimal arrangement.

Whilst we consider the options - including the emerging performance of the Co-op Bank in its new ownership and whether the Bank wishes to continue working with Shared Interest - we can reassure members that we are continuing to hold some funds completely outside the Co-op Bank, in order to reduce dependence on one organisation and the financial risks of holding all of our share capital with one Bank.

 

Previous statement on the Co-operative Bank Oct 2013

Dear Member,

As you will be aware the Co-op Bank has had widely publicised problems leading to a need to raise £1.5bn of extra capital to satisfy the Regulator that it is financially sound.

We wanted to take this early opportunity to reassure you that we are monitoring this sensitive situation on behalf of our members and wanted to update you on the latest position.

The Board of Shared Interest has been considering ways to manage the potential risk to the Society and has commenced a process of ensuring that a proportion of our capital is deposited outside of the Co-op Bank. This diversifies the risk but cannot be achieved very quickly as a proportion of our funds are tied up on fixed term deposits (in order to maximise interest earned).

The latest statements from the press and the Co-operative Group indicate that a deal has been struck in principle to ensure the survival of the Co-op Bank. We understand that this, however, comes at a price with the Co-op Group relinquishing control and remaining as a 30% shareholder - albeit the largest single stake. A significant proportion of the other shares would initially be owned by former creditors of the Bank but this does mean that their mutual status will change dramatically.

Encouragingly the CEO of the Co-op Group is quoted as saying "This bank will remain the Co-operative Bank......We are embedding the co-operative principles in the constitution of the bank to guarantee this". It is our Board's agreed view that, this news means that any risk to the survival of the Co-op Bank and the safety of our deposits at this point is much reduced, and this is obviously welcome news.

We do however want to reassure members and potential investors in the Society that we are; a) continuing a strategy of reducing dependence on any one bank and; b) currently reviewing whether the Co-op Bank remains the optimal main banking partner for Shared Interest. This will look at the same major aspects we considered in 2011 when we last formally reviewed our banking arrangement - the ethics of the organisation, security and pricing.

The position with the Co-op Bank is developing quickly and we will update this note as appropriate and as we have further information. If in the meantime you would like to discuss our position further please do not hesitate to get in touch with our Finance Director, Tim Morgan membership@shared-interest.com or on 0191 2339100.