Comment: Many questions for Co-operative Bank to answer

Is a flotation of the Co-operative Bank on the stock exchange demutualisation? Is this a step back for co-operative values and principles? Or is it an innovative way...

Is a flotation of the Co-operative Bank on the stock exchange demutualisation? Is this a step back for co-operative values and principles? Or is it an innovative way to access capital? And can the Co-operative Bank still be called ‘co-operative’?

The latter question is posed by Co-operatives UK’s Ed Mayo; and he outlines that the Bank is still majority owned by a co-operative, so it is still co-operative. But the ‘capital action plan’ unveiled by the Co-operative Group to inject £1.5 billion into the Bank raises more questions than answers.

Will the Bank be answering to the powers of the stock market and focusing on profit (or ‘return on equity’)? And how will this affect the Bank’s highly rated ethical scores once it is less member-owned?

Co-operative Group members are rightly questioning their ownership of the Bank and how they compare to shareholder investors — especially when it comes to AGM voting/attendance. Yet there are other co-operators who are complimentary of a plan that does not rely on a taxpayer bail-out.

This move has received mostly positive media coverage; and still keeps the mutuals’ slate clean that the sector has not needed a government bail-out.

But financial analysts have questioned whether the Group should have taken a larger hit from its reserves, rather than taking the a large slice of capital from bondholders. Individual and institutional investors will not know the full outcome, or potential loss of their investment until October. But one would expect an ethical organisation to ensure fairness.

Undoubtedly, there will be an impact on co-operatives. An analysis of Twitter by YouGov found that the ratio (or its ‘buzz score’) of positive/negative posts containing the Bank’s name fell from a high of 12.6 in April to a low of -27.1 in May.

The Bank is also a constant part of the news cycle with fresh developments being reported daily. And for this reason, the Movement’s celebratory time of the year, Co-operatives Fortnight, could not have come at a more appropriate time.

The Financial Times reported on the “strength of the movement” alongside other national media outlets with the publication of the UK Co-operative Economy report. The report provides a strong argument for the co-operative business model.

These past few months have been a wake-up call for co-operatives that more innovative ways are needed for capitalising our unique business model. On the co-operative grapevine there is talk that a radical solution is imminent through a new law proposal to create a different type of ‘co-op investors’ who receive returns on their stake.

It will be too late for the Co-operative Group to take advantage of, but hopefully there will never be a next time.

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