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Key messages

  • In February 2017 we announced that we were commencing a Formal Sale Process under the Takeover Code, alongside considering other options to build capital, to meet the longer term capital requirements applicable to all UK banks.
  • The Bank needs to build its capital due to a number of factors, which have changed since we launched our turnaround plan, including much lower for longer interest rates and greater than expected costs.
  • Today (28 June 2017) we are pleased to announce that we are supporting a Proposal to secure the long term future of the Bank as a viable stand-alone entity to be funded by capital from existing Investors. On 26 June, we discontinued the Formal Sale Process under the Takeover Code.
  • The Bank Board believe that the Proposal will provide the Bank with the capital needed to realise its potential as the UK’s leading ethical bank.
  • This is a good outcome for customers and will mean that The Co-operative Bank can continue as a viable, stand-alone entity with values and ethics and strong customer service continuing at the heart of the business.
  • Our co-operative principles are incorporated into the constitution and Articles of Association of the Bank, which ensures that co-operative values and our Ethical Policy remain core to the running of the Bank.
  • The Co-operative Bank name, brand and commitment to co-operative values, set out in our Ethical Policy will continue unaffected.
  • Today’s announcement does not in any way impact deposits or the products customers hold with us, including savings bonds, or the service we provide.
  • We thank customers for their continued support and loyalty.


FAQs

Q. What does this mean for me as a customer?

We understand that media coverage can be unsettling, however, today’s announcement does not in any way affect the products you hold with us or the service we provide.

This is a good outcome for customers and will mean that The Co-operative Bank can continue as a viable, stand-alone entity with values and ethics and strong customer service continuing at the heart of the business.

We remain committed to providing the customer service that our 4 million valued customers expect from us. 

We are pleased to be supporting a Proposal to secure the long term future of the Bank as a viable stand-alone entity to be funded by capital from existing Investors.

We believe there is great value in our distinct position in the market and that the relationship we have with customers, centred on our values and ethics, sets us apart and remains a key reason why customers choose to bank with us.

 

Q. Why should I stay as a customer?

We believe that The Co-operative Bank has a valuable role to play in providing customers with a different choice in the market, set apart by the values and ethics that remain a key reason why customers choose to bank with us.

Ensuring that these continue to sit at the core of the Bank is vital and we are delighted to be celebrating the 25th anniversary of our customer-led Ethical Policy during 2017.

We have worked hard to rebuild our retail banking proposition, differentiated by our values and ethics and strong customer service, which we know is valued by our customers.

This is a good outcome for customers and will mean that The Co-operative Bank can continue as a viable, stand-alone entity with values and ethics and strong customer service continuing at the heart of the business.

 

Q. What does this mean for the Bank’s ethical position?

Our Investors believe the further investment will provide the Bank with the capital needed to realise its potential as the UK’s leading ethical bank.

Reinforcing our ethical brand and proposition for customers is an integral part of our future plans.

The Co-operative Bank name, brand and commitment to co-operative values, set out in our Ethical Policy will continue unaffected.

We believe that The Co-operative Bank has a valuable role to play in providing customers with a different choice in the market, set apart by the values and ethics that remain a key reason why customers choose to bank with us.

 

Q. Does this mark the end of your brand as an ethical lender, as the Bank is now almost 100 per cent owned by hedge funds?

Our investors have supported the turnaround of The Co-operative Bank since 2013 and, as they say today, believe the further investment will provide the Bank with the capital needed to realise its potential as the UK’s leading ethical bank.

In 2013 the Bank, with the support of both the Group and our investors, embedded Co-operative ethics and values in the constitution of the Bank and since then the Bank has been operating as a separately managed and governed entity with these values at our heart. 

The Co-operative Bank name, brand and commitment to co-operative values, set out in our Ethical Policy will continue unaffected.

Nothing changes here under this Proposal and our unique Ethical Policy will continue to guide how we run the business.

 

Q. How can you still be named The Co-operative Bank if the Group stake is reduced / no longer an invested party?

Our Investors have supported the turnaround of the Bank since 2013 when they shared our commitment for embedding co-operative values in the constitution of the Bank. Since then we have been operating as a separately managed and governed entity with these values at our heart.  Nothing changes here under this proposal and our unique ethical policy will continue to guide how we run the business.

They share our commitment to building our distinctive ethical franchise and see strong future growth potential for the Bank. Through the Proposal announced today they have reaffirmed their support and belief in our ethical franchise and we both believe this will enable the Bank to enter a new phase in its turnaround focused around growth.

That further investment will provide the Bank with the capital needed to realise its potential as the UK’s leading ethical bank. This proposal will mean the Co-operative Bank can continue as a stand-alone entity, rather than being part of a wider banking group, as had been one potential outcome when we started the process.


Q. When will the Bank be profitable again?

We have always been clear that the journey to reshape our business would take time and there is still much to do, despite the positive news today. 

We are targeting sustainable profitability in the medium term. 

 

Q. I have a Fixed Term Deposit bond. Will the recapitalisation process apply to me?

Fixed Term deposit bonds are not affected.

Fixed term deposit bonds are not linked to the stock market.

Whilst the Fixed Term deposits have a fixed rate of interest, the bonds affected by the Proposal are traded on the stock market and are different to our retail Fixed Term Deposits.

 

Q. How can I find out if I have a Co-op Bond?

Retail bonds will be referred to as Fixed Term Deposits; these are not linked to the stock market.

Investments that are linked to the stock market are called Subordinated bonds or preference shares.

Capital Bonds/ preference shares are not FSCS protected and not sold through traditional retail channels.

These securities fluctuate in value and are officially listed/ traded on the stock exchange.

To find out if you have any, customers should contact their independent broker/ IFA accordingly.


Q. Is the small retail investor being unfairly treated in the recapitalisation process?

No. Retail holders who have less than £100,000 of the Bank’s 11.0 per cent Fixed Rate Notes due December 2023 are expected to receive cash at a level of 45 per cent of the nominal value of their notes, subject to an overall cap on the aggregate cash payable.

The Proposal has been discussed with the Financial Conduct Authority (FCA).

There are not expected to be any smaller holders of any bonds outside of the 11.0 per cent Fixed Rate Notes due December 2023.

 

Q. Is my money safe?

Like all banks, customers are protected by the Financial Services Compensation Scheme (FSCS), an institution which covers customers of all banks for up to £85,000 of retail deposits.

This announcement does not affect the products customers hold with us, or the service we provide.

Very importantly, we exceed, and continue to expect to exceed our minimum capital requirements (called Pillar 1 capital) and maintain sufficient liquidity to meet obligations.

This is about the need to further enhance our capital position due to a number of factors, which has changed since we launched our turnaround plan, including much lower for longer interest rates.

 

Q. I have seen lots of media coverage about the Bank. Should I close my account?

We accept that analysts and journalists will have different opinions on the Bank’s turnaround given the complexity of the challenges the Bank faces.

We have made good progress and improvements from the position the Bank was in of 2013, and we believe that the announcement today is the best route forward to enhance our capital position.

We have worked hard to rebuild our retail banking proposition, differentiated by our values and ethics and strong customer service, which we know is valued by our customers.

This update does not in any way impact deposits or the products customers hold with us, including savings bonds, or the service we provide.

We thank customers for their continued support and loyalty.