Welcome to this December newsletter from the Customer Union for Ethical Banking, the independent union for customers of The Co-operative Bank.

Our main two stories this month are the report from our virtual Gathering at the end of November and the news that a bid has been made for the bank by Cerberus Capital Management - a New York based private equity fund named, not very reassuringly, after the mythical three-headed dog that guards the gates of hell.

More on that after a quick update from our Gathering.

Save Our Bank’s 2020 Gathering, 21 November

Amid the worsening Covid crisis, we were forced to hold our Gathering remotely via Zoom this year, and as a result it was the best-attended meeting we have ever held, with some 60 people in attendance.

Zoom people

We were joined for the first part of the meeting by two members of the bank’s senior management team, Maria Cearns (Managing Director of Customer & People) and Lesley McPherson (Director of Communications and Marketing). Maria and Lesley gave an update on the bank’s year, including how it has been facing the Coronavirus crisis and supporting its customers through the pandemic, and answered a barrage of questions from Customer Union members. We then discussed the news that had broken days before of a bid for the bank and what our options are for encouraging a return to cooperative ownership. To help inform this question, we’ve recently put together a specialist panel of experts, one of whom was able to join the discussion. We also discussed our plans to campaign for the bank to reinstate external auditing of its Ethical Policy implementation, starting in January.

We have a fuller report of the Gathering available here.

Cerberus makes a bid for the bank


The Tuesday prior to our Gathering, the Co-op Bank contacted us to inform us that it had received "a non-binding offer for the bank" and that "discussions are at a very preliminary stage". The bank went on to say that its "priority and focus remains to deliver our agreed plan and transformation over the coming years". The bank made the formal announcement to conform with regulatory requirements as it attempted to raise £200 million in capital – on which more later.

Sky News then named the bidder as Cerberus Capital Management – and this was subsequently confirmed by the FT and the Guardian. The Co-op Bank has not made any confirmation of this. The Guardian quoted Customer Union director Ryan Brightwell saying that any new owners must maintain the bank’s ethical position or risk losing customers.

One source reported that “the firm could acquire the bank for as little as £200 million”. Given the bank’s current hedge fund owners pumped £700 million into the business just two and a half years ago, that’s a pretty low price, and we’re skeptical about whether the current owners would accept it, although we have to be prepared for the eventuality.

Nonetheless there is understandable alarm at the prospect of a sale to Cerberus, a company with a reputation as an asset-stripper. The UK Mortgage Prisoners campaign group has appealed to regulators to stop the sale, while Tory MP Kevin Hollinrake, co-chair of the All-Party Parliamentary Group on Fair Business Banking, said he couldn't think of a worse bidder and wrote to the Bank of England asking them to block the deal.

Whether or not this bid is serious, for us it underlines the urgency of working to encourage a cooperative bidder for the Co-op Bank. We will continue working to make sure the bank sticks to its ethical principles, and if this deal goes ahead we will consult with our 1,300 members about whether we choose to stay with the bank. We can have more influence on the outcome if we act together.

Bank completes capital raising

The reason the bank disclosed this offer was that it needed to, because it was embarking on an effort to raise £200 million in capital to meet stronger capital requirements from the Bank of England.

The kind of capital it needed to raise is called MREL, “Minimum Requirement for own funds and Eligible Liabilities.” The bank successfully raised the capital, although it has to pay a 9% rate of returnto the investors.

Other news

  • The Co-op Bank has launched an Ethics in Action email newsletter. If you want to make sure you get the newsletter, make sure you are signed up to receive email marketing from the bank through ‘My Settings and Details’ in the mobile app or ‘Profile’ in online banking. You can read the first three issues from OctoberNovember and December by following the links.

  • Customer Union director Shaun Fensom has given a wide ranging interview on the Save Our Bank campaign and Customer Union to Low Impact – which describes itself as “probably the world’s best sustainable living resource; connecting lifestyle and system change”. You can watch or read the interview here.

That’s all for this month. We’ll be back in touch in the new year. In the mean time we would like to wish you all the best for Christmas and the New Year, under what are very difficult circumstances for many of us. Stay safe and well, and enjoy the break as much as possible.

With warm wishes,

The Save Our Bank team