Should the Co-operative Bank keep its name after hedge funds take it over?

The Co-op Group's stake in the Bank is falling to just 1% after the latest rescue package – but there is still support for it in the co-op movement

The Co-operative Bank has avoided being sold after a £700m rescue deal but issues surrounding its use of the co-operative name are unresolved.

These issues have loomed since 2013, when a £1.5bn hole was found in the Bank’s finance and hedge funds were brought in to save it.

The latest deal will cut the Co-op Group’s stake from 20% to just 1%, leading to renewed calls for the Bank to drop the “co-operative ” name.

However, Co-operatives UK, the apex body for the UK co-op sector, has said the Bank can continue to use the name. It says the use of term “co-operative” where a business is  subject to a regularly monitored compliance agreement, based on formal criteria set in 2015.

These state that an organisation must:

  • Exist to promote co-op activity and be recognised by the co-op movement in relation to this
  • Operate in line with co-op values, and not discredit the co-op business model
  • Not use the term in ways that serve to mislead others as to whether it is a co-operative.

Shaun Fensom, from the Save Our Bank Campaign – a customer union formed to hold the Bank to its ethical policy and return it to majority co-operative control – thinks the Bank’s customers can make it more meaningfully ‘co-operative’ than ever.

“The Co-op Bank’s most valuable asset is its unusually loyal customer base,” he said. “The hedge fund owners now understand this. That is why the customers have the whip hand on whether the deal succeeds, and indeed on the future of the bank. This is a power that we can actively wield if we are organised. With its 10,000 supporters, Save Our Bank has had real success calling the bank to account. Imagine what we could do with 100,000.

“Member ownership is a fundamental co-op principle. So is member control. While Co-operative Group members exercised ownership of a sort when the bank was 100% and then 20% owned by the Group, they exercised minimal control. By organising in the customer union (a legally constituted co-op) our members are taking a step towards making the bank into a real co-op, which it never was before. By crowdfunding a co-operative share in the bank then we will take the first steps on ownership, long though that road will be.

“Maintaining customer loyalty means maintaining the Bank’s ethics, its links with the movement and probably its name. The Bank is very aware of this: that’s why it provides generous funding for co-op development through the Hive.”

As for Save Our Bank’s stance on the Co-op Banking keeping its name, Mr Fensom said: “We have said from the start of the sale process that it is up to the members of the customer union whether to approve any deal. It is a co-operative after all. If the members decide to work with the Bank then we will be calling on co-operators to join us and use crowd power to bring the bank fully back into the fold. That is how the movement was built in the first place.”

Paul Ellis, chief executive of the Ecology Building Society

Paul Ellis, CEO of Ecology Building Society, said: “Ecology has been a long standing customer of the Co-op Bank so we and our members have followed developments closely. We’re pleased that the Bank will be maintained as an independent entity and there won’t be any further concentration of clearing facilities amongst the big banks.

“It’s now up to the Bank to publicly demonstrate that it has earned the right to continue using the co-op name by ensuring that there are safeguards in place to ensure that the Bank retains a genuine commitment to ethical values and that they are also providing meaningful support for the co-operative and mutual movement.

“Co-operative and mutual ownership models offer a framework for resilient and progressive businesses that genuinely support the interests of all. We believe that the wider application of co-operative values and principles in financial services results in a more inclusive approach. For example, we recognise the vital role that credit unions often play in tackling financial exclusion and, at Ecology, we are proud to support improving access to affordable and quality housing by providing lending for social housing and community purposed housing.”

In terms of international precedent for use of the co-op name, Charles Gould, director general of the International Co-operative Alliance, said there is “a divergence across countries in precisely how they include co-operatives within their regulatory structure and consequently, in the nature of some of the organisations that are entitled locally (or not prohibited) from using a co-operative name. Sometimes these are affiliated to more traditional co-operatives.

He added: “Of course, there are many organisations in the co-operative family that have ‘co-operative’ in their name without being a co-operative. Witness the International Co-operative Alliance, which is an international non-profit association.”

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