15th November 2013
The Cooperative Bank remains under huge pressure as ratings agency Fitch downgraded the bank this week from B to -B.
Fitch says there is a risk that Cooperative’s proposed £1.5bn fundraising might fail and that is might have to be taken under Bank of England control. The vote takes place on 29 November.
The Coop Group will hold 30 per cent of the bank, with two hedge funds Aurelius and Silver Point taking the rest. Fitch is concerned that the new structure will make it difficult for the group to generate new capital as the bank will struggle to make a profit. Fitch is also worried that the bank could lose customers wedded to the bank’s ethical stance.
In a statement, Co-op Bank said: “The Co-operative Bank notes the announcement from Fitch. The rating agency’s response is anticipated and does not alter the Bank’s confidence in the Recapitalisation Plan, which is focused on delivering the £1.5bn of capital necessary to put the Bank back on a stronger financial footing.”
In a separate move, Campaigning group Move your Money has attacked the Co-operative Bank for withdrawing from providing banking services to local authorities.
Chief Executive of Move your Money, Laura Willoughby, said: “This is a short-sighted move for Co-op bank. Councils are an important and profitable market.
“Local Authorities need to be able to choose from a competitive market and find banks that share their values and aspirations. Instead, this announcement leaves their choices virtually non-existent. It gives the big 5 banks a clean run at public money, and makes a mockery of the Government’s stated ambition to diversify and regionalise UK banking and promoting competition.
“Councils should not give their contracts to any bank without demanding local benefit and better behaviour. It’s time for Local Authorities to flex their muscles as the powerful customers that they are! Co-operative Bank has 35% of the market share of local authority transactional banking contracts, over 160 of all local authorities.”