Following plans by the Co-operative Bank to float on the stock exchange, the Co-operative Group’s Chairman Len Wardle reassures readers the decision was not taken lightly . . .
‘Bank to float on stock exchange’. While not the worst headline in recent months, the splash in Co-operative News will only have reinforced members’ concerns that the Group was about to sell a significant minority equity interest in the Bank to investors.
I fully understand such misgivings. Let me reassure you that the decision to seek a listing for the ordinary shares of the Bank was not taken lightly, but was approved at Group Board level, following a recommendation from the Banking Group Board, and only after very detailed consideration of all the other options open to us.
As elected members, the Group Board is the highest level of our democratic governance, and it is our responsibility to act decisively to protect the interests of our stakeholders.
Under the recently announced capital action plan, the Group has decided to contribute fresh money into the equity of the Bank, from its own resources, alongside the contribution of others, so the new £1.5 billion capital requirements of the Bank can be met. In total, this is being done in three broadly equal proportions, from a combination of:
a) the capital generated from new shares in the Bank issued as part of an exchange offer to be made to holders of the Bank’s subordinated capital securities;
b) a contribution from the Group by way of the issue of a fixed income instrument as part of the exchange offer; and
c) a further contribution, underwritten by the Group, to the Bank, expected to be sourced from the sale proceeds of the Co-operative Life Insurance and Asset Management and of the Co-operative General Insurance businesses; interest savings on the Bank’s subordinated capital securities accepted in the exchange offer; and the results of certain capital increasing management actions by the Bank.
Both the Group and Bank boards believe these capital actions are in the long-term interests of stakeholders taken as a whole and of the Bank itself.
Members understandably will also want to know the events that led to the recent announcement of the Bank’s capital action plan to address its £1.5bn capital shortfall.
To address this, the Group recently announced that Sir Christopher Kelly, who previously chaired the Government’s Committee on Standards in Public Life, would chair an independent review into the events leading up to the June 17 announcement of the Bank’s capital action plan.
It is intended that Sir Christopher will report to members at our annual meeting in May. We are determined to identify the lessons which can be learnt in order to strengthen the Bank, the Group and the Co-operative business model generally.
Finally, I’d like to say a few words about our new Chief Executive. It was hardly the induction he expected, but since arriving in May, Euan has worked closely and tirelessly with the Board, and his strengthened management team, to address the challenges the Bank faces.
The Group is confident that, under the Bank’s strengthened management team, the capital action plan offers the best way forward. We believe it is the right approach to ensure that we continue to provide a great service for our 4.7 million Bank customers, while safeguarding the interest of other stakeholders.
Much has been made in the media of the challenges facing us and we have tried to be as open and honest with members as possible. We will continue to take this approach; however, we have also taken a deliberate decision to only communicate with members when we have something substantive to say. In the meantime, I would like to thank members for their forbearance and support so far.
In the autumn the Group will mark formally our 150th anniversary and it will be a time for celebrating our heritage and taking pride in our achievements. Our current adversity should not detract from that. It should, though, give our thoughts about the future considerable added focus.