Save Our Bank's view on the Co-op Bank's Values and Ethics Report 2015

In late May 2016, the Co-op Bank published its 59-page Values and Ethics Report for 2015

There was a lot for the bank to report following its extensive governance reforms. Last year was the first full year the bank had in place its independent Values and Ethics Committee, chaired by Laura Carstensen. In March new terms of reference were adopted for this committee, including the reporting and monitoring of the 'alignment of treatment of the Bank’s customers with its values and ethical policies' - more on this later.


Headlines from the report included:

  • Refusal to accept business from two organisations that failed to meet climate-change criteria;
  • £1m raised for designated charities through affinity credit cards;
  • £25k donated to charities through account switching incentives;
  • The launch of the Hive – a resource hub to support the development of new and existing co-ops;
  • New product-design process using 6 customer principles translated into 15 customer standards, to be formally embedded in corporate governance in 2016;
  • Revamped procurement policy to help drive environmental and ethical improvements throughout the supply chain;
  • Establishment of an employee-focused diversity and inclusion committee.

These headlines demonstrate a good rate of progress at the bank in implementing the new ethical policy adopted last year and a clear determination to mark the bank out on these issues. Save Our Bank welcomes this progress.

Further, as reported by Save Our Bank, the bank returned to campaigning by teaming up with Refuge, the national domestic violence charity, on the My Money, My Life campaign. In 2015 support from the bank improved understanding of financial abuse and control that occurs within relationships. The programme has supported Refuge to produce a guide for women, and aims to develop a code of practice for financial institutions.

Pay is an ethical issue

There are areas however where we believe the bank needs to improve how it implements ethical policy, and how it reports on that implementation.

The report partially addressed remuneration rates, giving the change in percentage of staff within broad pay bands between 2014 and 2015. There was an increase for the lowest paid in line with the rise in living wage rates, however there was an 11% reduction in staff numbers from 6,367 (2014) to 5,643 (2015) and closure of branches. This is a pattern repeated across much of the banking industry, but the cuts are more acute in the Co-op which is still losing money.

No reference was made to executive pay rates and how they square with the bank’s ethical policies, despite this being explicit in the Values and Ethics committee's terms of reference. Save Our Bank has repeatedly called for restraint in top executive pay, particularly when the bank is losing money and when staff numbers are being reduced.

The report’s auditors were also critical: “the Bank has not disclosed data or commentary on equal pay by gender for equal roles for 2015. Given that this is a material issue for stakeholders, we recommend reinstating disclosure of this indicator and related reporting in the future." 

Total assets (e.g. loans) to social and environmental organisations dropped by 33% (£335m in 2014, to £224 in 2015), although the ratio of such assets to social businesses remained the same at around 40%, as the overall loan book reduced. This is disappointing. We’d like to see the bank building its business with social and environmental organisations.

Also 2015 saw an undrawn lending facility of £64m for co-operatives out of £90m available. This raises the question as to why these loans are not being taken up.

We believe this is relevant to the auditors’ criticism: “that no further disclosure on progress about Bank’s strategic approach to supporting social and economic development is provided this year.” We’d like to see the bank leading on the need for a banking system that promotes regional development and better serves communities.

Account closures

But perhaps the biggest omission in the report concerns account closures for human rights and solidarity organisations, including the Palestine Solidarity Campaign, the Cuba Solidarity Campaign and various smaller support groups and charities. Save Our Bank has been campaigning on this issue.

The auditors of the report point out: "While the Bank continues to report on issues and performance data that are of concern to its stakeholders, a number of disclosures have not been expanded upon. For example, we recommended last year reporting how the Bank incorporates the protection of human rights into its strategy and product development.”

We believe that the bank should engage with human rights NGOs better to understand and mitigate the impact of money laundering regulations and ‘de-risking’ on their work.

We have also criticised the bank for the way that these closures have been handled. Given the statement in the report that Treating customers fairly is at the heart of our Ethical Policy we feel the bank should have addressed the closures in the report.

Good, but could do better

Compared to the main high street banks, the Co-op Bank continues to stand out in having the only customer-led ethical policy and well-defined values and ethics reporting framework. That’s why we are staying with the Co-op Bank. However, we also think it could do better.