I have set this page up as a campaign reference source for retail investors in Co-op Bank bonds and preference shares.
To date over 2,000 pensioners and retail investors joined the campaign directly plus stockbrokers and financial advisers with over 1,000 affected clients. The principal objectives of the campaign are to:
1. Campaign for a suitable alternative (to shares) offer for pensioners and retail investors who bought bonds and preference shares for income and for whom shares will not be a suitable exchange.
2. Ensure that any offer is made on a voluntary basis so that those who are willing to take the risks of not accepting can retain their investments without the terms being amended or potentially being exchanged or repurchased against their wishes.
3. Campaign for regulatory protection of retail holders under the offer.
4. Campaign for the banking regulator (PRA) to review the requirement it has imposed on the Bank.
5. Campaign for the Co-op Group to do more to support the Bank, to honour its previous commitments and to seek redress from those responsible for the £1.5 billion black hole and its concealment before seeking to impose losses on its retail investors.
6. Ensure that the Bank complies with the rights of its preference shareholders as set out in the articles.
7. Ensure that the Bank and its Board are not using conflicted advisers and that no members of the Bank's board are conflicted. If the Co-op Bank is claiming that existing equity is being written off then in these circumstances the Board's duty must be to the Bank's creditors.
8. Seek to engage with the Bank, its advisers, the Trustee and regulators.
9. Campaign for early clarity on proposals for retail investors rather than have them subjected to months of scaremongering, uncertainty and duress.
10. Consider legal and compensation remedies which may be available if losses are enforced on retail investors.
Campaign Email List Link for holders of Co-op Bank retail bonds and preference shares to add their details to the campaign email list.
Follow me on (@MarkTaber_FII) on Twitter which I will use for quick announcements and updates.
For confidentiality reasons I have not uploaded copies of email updates but below is a list of updates sent so that those on the Campaign Email List can check they have them. If you have added your details via Campaign Email List Link you should be receiving the email updates.
26 June 2013: Co-op Retail Investors Campaign Update 1 sent by email.
5 July 2013: Co-op Retail Investors Campaign Update 2 sent by email.
11 July 2013: Co-op Retail Investors Campaign Update 3 sent by email.
18 July 2013: Co-op Retail Investors Campaign Update 4 sent by email.
30 July 2013: Co-op Retail Investors Campaign Update 5 sent by email.
14 August 2013: Co-op Retail Investors Campaign Update 6 sent by email.
10 September 2013: Co-op Retail Investors Campaign Update 7 sent by email.
29 September 2013: Co-op Retail Investors Campaign Update 8 sent by email.
16 October 2013: Co-op Retail Investors Campaign Update 9 sent by email.
8 November 2013: Co-op Retail Investors Campaign Update 10 sent by email.
19 November 2013: Co-op Retail Investors Campaign Update 11 sent by email.
6 December 2013: Co-op Retail Investors Campaign Update 12 sent by email.
10 January 2014: Co-op Retail Investors Campaign Update 12 sent by email.
10 November 2013: Response from Sajid Javid - Financial Services Secretary to HM Treasury
22 October 2013: Response from Andy Haldane on behalf of the FPC
4 October 2013: Response from Andrew Bailey 4 Oct 2013
3 October 2013: Letter to Mark Carney & FPC Members
2 October 2013: Letter to FCA concerning FSA waiver given to Co-op Group
19 September 2013: Sixth Open Letter to the PRA
11 September 2013: Letter to the FCA concerning false market in Co-op Bank listed securities
9 September 2013: Letter to the PRA & FCA concerning Treasury Select Committee evidence
5 September 2013: Response from Paul Tucker on behalf of FPC members
3 September 2013: Response from FCA to Second Open Letter
3 September 2013: Fifth Open Letter to the PRA
22 August 2013: Open letter to Richard Pym (Co-op Bank Chairman)
15 August 2013: Fourth Open Letter to the PRA
9 August 2013: Open letter to all FPC members
7 August 2013: Response from PRA to Open Letter of 26 July 2013
1 August 2013: Second Open Letter to the FCA
26 July 2013: Third Open Letter to the PRA
23 July 2013: PRA Response to Open Letters of 9 July and 17 July 2013
23 July 2013: FCA Response to Campaign Open Letter of 12 July 2013
17 July 2013: Second Open Letter to the PRA
Financial Reporting Council Investigation into the preparation, approval and audit of the financial statements of The Co-operative Bank plc, up to and including the year ended 31 December 2012.
Co-operative Group's Kelly Review The review has been commissioned by the new executive teams at the Group and the Bank, together with the Boards of both organisations, on behalf of the Group's members. It will look at the decision to merge The Co‑operative Bank with the Britannia Building Society in 2009 and the proposed acquisition of the Verde assets of Lloyds Banking Group. It will include an analysis of strategic decision making, management structures, culture, governance and accounting practices and aspects of the role of the Bank auditors.
FCA Enforcement Investigation The Financial Conduct Authority (FCA) enforcement investigation into events at the Co-operative Bank up to June 2013.
PRA Enforcement Investigation The Prudential Regulation Authority (PRA) enforcement investigation in relation to the Co-operative Bank.
HM Treasury Independent Inquiry Chancellor of the Exchequer orders an independent investigation into events at the Co-op Bank and the circumstances surrounding them.
2 Dec 2013: Early Participation Results Announcement
Mark Taber comments: It was always going to be hard to reach enough retail investors to meet the 75% 'Early Bird' threshold so that the votes would be passed and the higher offer consideration obtained for holders of the bank's retail bonds but all the hard work since the offer was announced on 4 November has paid off and this should secure the best outcome for retail investors under the circumstances and is a big step towards stabilising and securing a successful future for Co-op Bank under its new management and ownership and governance structures.
4 Nov 2013: Co-op Bank Recapitalisation Plan
Mark Taber comments: "This deal has been extremely hard fought and is now a much better solution for retail holders and pensioners. Every stakeholder had to make concessions to arrive at this consensual restructuring to stabilise The Co-operative Bank. I want to thank The Co-operative Group for listening to our concerns and offering a solution for our retail holders which incorporates our ideas for preserving their income for long periods of time. It is now up to all holders to decide whether to accept but we believe it is a much better solution. We now hope that our support of the offer will play its part in the future success of the Bank under the innovative hybrid structure which enshrines co-operative values while providing sound governance and access to capital markets.
“I would like to thank the many volunteers who helped in this campaign in so many ways; you made a big difference and your voices were heard. I am grateful for the knowledgeable support and guidance from my fellow campaigner Stephan Wilcke and the other members of our steering committee who donated so much of their time for free, and also from Brown Rudnick LLP, which has acted as our legal advisors throughout the campaign. The Co-op Bank has appointed Cannacord Genuity to provide an independent financial opinion on whether the liability management exercise (LME) is fair from a financial value perspective for the classes of bonds and equity held by retail investors, a move we support. We want to thank them for their constructive engagement and support in arriving at this solution.”
21 Oct 2013: Trading in bonds & preference shares suspended
Update on recapitalisation plan (Euan Sutherland video)
Update on recapitalisation plan (announcement)
Mark Taber comments: Very disappointing that news is leaking out through the media rather than formal channels and securities are suspended as a result.
Euan Sutherland's statement 'Most importantly we have built a fair and attractive proposal for small investors the hardworking families across Britain that have invested in the Co-op Bank.' is something we must hold him to and indicates that the Co-op has finally listened.
For more listen to my comments on BBC Radio 5 Wake Up To Money (22 Oct 2013). Co-op story starts at about 06:10 at:
9 Oct 2013: Co-op Bank director changes to increase independence of board
27 Sept 2013: Campaign Press Release:
We are pleased to be able to announce that the first steps towards rebuilding trust between the Co-op and its retail bondholders are being taken. Over the last 2 weeks there have been constructive talks between representatives of the retail bondholders and UBS, the advisors of the Co-Operative Group. These talks are being conducted by Mark Taber and another representative of the campaign with extensive high level banking and restructuring experience.
The talks have been based around our suggestions for how the Co-operative Bank's planned exchange offer can raise the £1 billion of core equity tier 1 capital the PRA is currently requiring by the end of 2013 within the bounds of its plan as announced to date. Crucially we are also attempting to address the needs of the large number of pensioners and retail investors who rely upon the income from their investments and for whom non-dividend paying equity is inappropriate.
It is important that our group is satisfied that the Co-operative Group is making its maximum contribution and that the amount of capital the Bank is seeking to raise is absolutely required. We look forward to continuing our discussions towards taking this process to the next stage in the very near future. We believe that this can only be achieved through a consensual approach involving representatives of all groups whose participation is required, having access to the same level of information as the Co-op Group itself.
20 Sept 2013: Independent committee of Co-op Bank directors be formed to consider third-party approaches in relation to the Group's recapitalisation plan
29 August 2013: Co-op Bank interim results announcement
Mark Taber comments: It is disgraceful that Co-op Group is not taking responsibility and still (10 weeks on from 17 June announcement that they are mindful of retail investors and will look at more suitable alternative) there is no mention of them in today's announcement. Further points:
- still no mention of promised consideration for retail investors, financial advice 10 weeks after 17 June announcement
- pinning 'what went wrong' on Kelly inquiry to report in May 2014 misses the point and is of no use to pensioners who rely on income from their bonds. Co-op Group, as 100% shareholder is responsible for whatever has happened, and should face up to that in accordance with its own principles.
- Group is unbelievably stating that its £0.5bn contribution in 2014 is 'contingent on successful exchange offer'. PRA should not allow this and should make a direction to C-op Banking Group.
- Group has charged another £36.4M to the Bank (in addition to c.£30M in 2012) in relation to aborted Verde deal. Verde was a deal between Co-op Group and Lloyds.
- have not explained what has happened since 2012 results were signed on 20 March to result in £496M of further loan impairments.
- have moved the goalposts yet again since 17 June announcement on CET1. On 17 June said £1bn would take them above 9% at 2013 y/e. Now saying 7%+ !
- have also moved goalposts on IT systems. 2012 results clearly stated that IT system would be used if Verde did not proceed. But now they are changing strategy and writing off a further £148.4M as a result.
- have stated that Bank 'will not be profitable for some years' so presumably no prospect of a dividend on the ordinary shares they will be offering pensioners in exchange for their bonds for some years either. So how can their offer as announced to date be suitable for their pensioner investors?
Mark Taber comments: This is terrible news for around 7,000 pensioners and individuals who rely of these former PIBS for income and will cause further distress and hardship. It is also unnecessary on the part of the PRA as delaying payment does not improve the capital position of the Bank. It is very cruel to hold pensioners income hostage to the future offer in this way as whether or not the pensioners accept will not determine the success of the offer on which their income is being made dependent. By admission of the Co-op they only account for £65 million of its £1.3 billion subordinated bonds. There is world class buck passing between the PRA and the Co-op rather than urgently reviewing the situation, as has just been done in the case of Nationwide, and the pensioners are suffering further as a result.
12 July 2013: Independent Review of Co-op Bank
Mark Taber comments: What I find deeply concerning is the way in which the Co-op seems to be trying to instigate a cover up through commissioning an 'independent' inquiry by Sir Christopher Kelly. The PRA is leaning heavily on this enquiry in its responses to investors which makes me suspect it is also behind this. The inquiry will conveniently not start until September with findings next May - well after bondholders have been stuffed if the Co-op gets its way and it is being done on behalf of members and not bondholders. I have received pretty compelling evidence of what has happened already so I cannot believe that the new Co-op board are really so clueless that they need Sir Christopher to tell them in 10 months time. The Co-op Bank is claiming that existing equity is being written off. In these circumstances the Board's duty must be to the Bank's creditors. And before seeking to force losses on the Bank's creditors the Board should be exploring all avenues of recovery from the auditors, advisers, former Group and Bank directors and Co-op Group.
17 June 2013: Co-operative Bank Capital Raising Plans Announcement
Mark Taber comments: See Trouble at the Co-op
23 March 2013: Co-operative Bank Annual Report & Accounts
12 Oct 2012: £4M Euro Note Programme Prospectus
19 July 2012: The Co-operative Group and Lloyds Banking Group agree non-binding heads of terms for the acquisition of the Verde business
News Release - Financial Policy Committee statement from its policy meeting, 19 March 2013
20 June 2013: Prudential Regulation Authority (PRA) completes capital shortfall exercise with major UK banks and building societies
Key background coverage:
Financial Times Financial Times Campaign Profile
Investors Chronicle Investors Chronicle Campaign Feature
Sky News TV Interview Co-op Bondholders Have 'Right To Expect Group To Do More'
Due to the huge amount of media coverage I have archived links to articles from earlier months on Campaign Media Archive page.
The Guardian - 5 Nov 2013
The only winners, relatively speaking, are retail investors in the junior bonds. Thanks to Mark Taber's campaign on behalf of pensioners and others, they have got substantially better terms than a textbook restructuring would have suggested. The outcome is not painless for the pensioners but income, rather than shares, is what the junior bondholders wanted and the Co-op, asked to live up to its ethical mantra, has been persuaded to cough up £129m. Smart negotiating, Mr Taber.
The Mail - 5 Nov 2013
Initial plans to bail-in small retail bondholders were defeated, due to the efforts of activist debt expert Mark Taber and others. The burden has fallen on bigger bond holders including some hedge funds.
Read more: http://www.thisismoney.co.uk/money/markets/article-2487417/ALEX-BRUMMER-Foreign-exchange-scandal-casts-shadow-City.html#ixzz2joISZfSo ;
The Independent - 5 Nov 2013
It should also be noted that their intervention has played a role in securing a better deal for retail bondholders, although the real credit for that goes to Mark Taber, who led a remarkably successful fight on their behalf and is one of the few actors in this drama to emerge smelling of roses.
Robert Peston - BBC - 4 Nov 2013
In theory, those retail investors - who have been represented by the financial campaigner Mark Taber - have got a deal closer to what they wanted than Co-op Group's initial proposal.
Back then they were being offered shares in the bank. But this horrified many of them, who had come to depend on the fat interest being paid on their preference shares and perpetual subordinated bonds (known as pibs).
So Co-op Group is now offering them a couple of options: the chance to receive a decent tax-free income for 12 years, but with no repayment of principal at the end of the 12 years, or an immediate write-off of between 15% and 40% of the value of the bonds and a continuing interest payment of 11% on what's left.
Mr Taber tells me he is happy with what Co-op has now put on the table, but he concedes that it will be hard work securing the requisite majorities.
Citywire - 5 Nov 2013
This is thanks to what is being referred to internally at Co-op as the ‘Taber Tip’ after Mark Taber, fixed income expert and head of the Co-op campaign group for retail investors. Although it has not been confirmed, it is thought that he squeezed £40 million extra out of the group for an ‘early bird’ deal.
Date Publication Headline
10-Oct Co-operative News Co-op Bank: Plan B Emerging? 09-Oct IFA Magazine Co-operative Bank makes changes ahead of potential listing 09-Oct The Times Four directors head for the exit in Co-op Bank boardroom reshuffle 09-Oct Manchester Evening News Co-op removes four directors from board 09-Oct Evening Standard Four directors exit troubled Co-op Bank 09-Oct Reuters Co-op Bank distances itself from parent with board revamp 09-Oct The Scotsman Co-op Bank unveils boardroom shake-up 09-Oct FT Adviser Co-op bondholders still in dark: Taber 09-Oct Citywire Co-op Bank reshuffles board as capital plans gain pace 09-Oct Citywire Who was responsible for Co-op Bank's demise? 09-Oct Daily Telegraph Co-op Bank shakes up board ahead of float
08-Oct Daily Mail Retail bondholders frozen out of Co-op's rescue talks weeks before it publishes final plans, campaigner Mark Taber warns
07-Oct Citywire Co-op bondholders left in the dark over bank negotiations
07-Oct The Times Regulator ‘dangerously naive’ over Co-op Bank rescue talks 04-Oct Bloomberg Co-Op Bank’s Initial Plan to Boost Capital Was Rejected by FSA 03-Oct City AM Co-op bidder advised by ex-head of Northern Rock 03-Oct Sky News 'Applegarth Firm' Eyes Co-op Insurance Bid 30-Sep Finextra Social channels: a lightning rod for the whole bank?
29-Sep Sunday Express Share windfall for Co-operative's investors 28-Sep This is Money Bank of England rejects blame for having allowed the Co-operative Group to go unregulated 28-Sep Herald Scotland Goodhart warns of bank bail-in consequences 27-Sep Bloomberg Co-Op Group Debt Cut by Standard & Poor’s on Financial Risk 27-Sep Bloomberg Co-Op Group Opens Bondholder Talks as Bank Seeks Debt Swap 27-Sep FT Adviser Co-Op Bank: RIP 27-Sep Investors Chronicle Un-Co-operative 25-Sep FT Adviser Co-op Bank structure questioned as deputy CEO stands down 25-Sep Wall St Journal Co-op Bank Tussle Shows Difficulty of Shielding Taxpayers 23-Sep The Slog (blog) co-op-crisis-regulating-the-irregular-turns-surreal-as-hedge-fund-sharks-pile-into-bondholder-fiasco 23-Sep This is Money City regulators believe Britannia's risky loans were 'key factor' in Co-op black hole
23-Sep Manchester Evening News Britannia losses 'behind Co-op woes' 23-Sep The Independent Beleaguered Co-op in fresh black hole challenge 23-Sep City AM Watchdog: bad loans to blame for Co-op woes 23-Sep The Guardian Bank of England disputes former Co-op chief's evidence 23-Sep Daily Telegraph Britannia loans 'key factor' behind Co-op woes, Andrew Bailey says 21-Sep Daily Telegraph Will Wall Street sink the Co-op? 21-Sep Daily Telegraph Ten funds launch fight against Co-op 21-Sep The Independent Co-op Bank bondholders target their fury at City watchdogs 20-Sep Daily Telegraph Co-op Bank deputy quits struggling lender 20-Sep BBC website Co-op Bank considers alternative rescue plan options 20-Sep Financial Times Co-operative Bank bows to bondholder pressure 20-Sep FT Alphaville Co-op Bank: Plan B 20-Sep The Guardian Co-op forced to consider hedge fund plan 20-Sep Daily Telegraph Co-op bows to bondholder pressure over £1.5bn capital raising 20-Sep The Scotsman Co-op tried to persuade bank deputy Bulmer to stay 20-Sep Manchester Evening News Co-op Banking Group's deputy CEO to step down 19-Sep FT Blogspot Stand By Your Bank
20-Sep Bloomberg Co-Op Regulator Deal Cited as Bailout Roadblock by Bondholders
19-Sep The Times Co-op lifts obstacle to letting bank fail 18-Sep Investors Chronicle Co-op fight set to get messy 18-Sep Co-operative News Co-op Bank: Playing Poker on a Slippery Slope? 17-Sep Daily Express More pressure on Co-operative Bank 17-Sep City AM Big investors want more shares from Co-op Bank rescue plan 17-Sep AOL Money Pressure on Co-op Bank rescue plan 17-Sep Daily Telegraph Co-op hedge funds plan debt-for-equity swap 17-Sep Financial Times Co-op bondholders plan aims to put lender in hands of investors 17-Sep This is Money Powerful group of hedge funds tables alternative plan to plug £1.5bn black hole at Co-op bank 17-Sep The Independent The Co-op’s treatment of it bondholders is nothing short of shabby 17-Sep The Sun New Co-op rescue deal: U-turn on ‘no Plan B’ message 16-Sep The Guardian Co-op Bank under pressure over plan to plug capital shortfall 16-Sep Reuters Co-op Group says willing to meet with rebel bondholders 16-Sep Evening Standard Bondholders demand talks on Co-op Bank bail-in plan 16-Sep Financial Times More cake from Co-op and no death 16-Sep CityWire Co-op faces new challenge over £1.5bn rescue 16-Sep FT Adviser Too big, too soon 16-Sep The Times Co-op Bank urged back to restructure drawing board 16-Sep Manchester Evening News New rescue plan launched for Co-operative Bank 16-Sep City AM Co-operative Bank investors attack plans for bail-in deal 15-Sep Daily Telegraph Co-op restructure challenged 15-Sep Sunday Times Co-op rebels challenge bank losses 15-Sep Financial Times Co-op bondholders step up pressure for ‘plan B’ on debt restructure 13-Sep Sky News Co-Op Group Lenders 'Close To New Deal'
13-Sep The Times Co-op accused of creating false market with silence 11-Sep BBC website Regulator v Co-op ex-boss: not a 'vendetta' 11-Sep The Independent James Moore: Will the FCA investigate the Co-op? It must make its position clear 11-Sep The Independent Watchdog could look at Co-op statements about bank's strength 09-Sep MoneyWeek I need to clear the air about the Co-op
07-Sep The Times Bondholders pile pressure on Co-op Bank 06-Sep Financial Times Conflicting tales of woe at the Co-op Bank
05-Sep The Independent A tale of two Co-op accounts raises some stark discrepancies 05-Sep Daily Express Former head of Co-operative Bank repeatedly warned over 632 Lloyds takeovers 05-Sep The Independent Former Co-op Bank chief executive in clash with watchdog 05-Sep City AM Former Co-op boss in row over bank bid warning claims 05-Sep The Times Richardson’s eye misses the ball 04-Sep The Guardian 'Yawning gulf' between evidence given by Bank of England and Co-op
04-Sep Daily Telegraph Bank of England slams Neville Richardson account of Co-op woes 04-Sep BBC website Co-op Bank boss 'warned against Lloyds deal' 04-Sep Financial Times Ex-director Roger Gorvin attacks Co-op treatment of bondholders 04-Sep FT Alphaville warning-co-op-bank-bondholders-redux 04-Sep This is Money Testing the truth at the Co-operative bank 04-Sep Mortgage Strategy Retail investors slam Co-op on rescue deal 04-Sep FT Adviser Co-op crisis not my fault: Richardson 04-Sep This is Money Former Co-op Bank boss Neville Richardson incurs wrath of Bank of England after blaming regulators for lender's woes 04-Sep Reuters Former-co-op-bank-boss-warned-against-lloyds-branch-deal 04-Sep ITV news Co-op Bank problems - who is telling the truth? 04-Sep The Guardian Ex-Co-op boss fights back, dragging Bank of England into Britannia row 04-Sep Financial Times Comments spark row over Co-op’s bad loans 04-Sep The Guardian 'Yawning gulf' between evidence given by Bank of England and Co-op 04-Sep FT Adviser Campaigner hits out at Co-op Bank restructure 04-Sep Sky News TV Co-op Bondholders Have 'Right To Expect Group To Do More' 04-Sep Bloomberg Co-Op Bondholders Seek Shelter From New Regulations: U.K. Credit 03-Sep Daily Telegraph Former Co-op director Roger Gorvin attacks 'unethical' bank over rescue 02-Sep Daily Telegraph Co-op 'in cloud cuckoo land' over refusal to talk to bondholders 02-Sep Computing Co-op Bank writes down £148.4m of IT investments 02-Sep Financial Times US hedge funds attack Co-operative Bank as ‘irresponsible’ 02-Sep Daily Telegraph Co-op Bank loan value 'deficit' grows to £3.6bn
02-Sep The Times Spotlight falls on former bank boss 01-Sep Mail on Sunday Former Co-op Bank chief Neville Richardson faces MPs' calls to cut £4.6m pay packet
Earlier media coverage has been archived on the Campaign Media Archive page.
Your MP: http://www.parliament.uk/mps-lords-and-offices/mps/ or even easier is to use http://www.writetothem.com/
The head of the PRA is Andrew Bailey and his email address is: firstname.lastname@example.org
The Chief Executive of Co-op Bank is Niall Booker: email@example.com
The Chairman of Co-op Bank is Richard Pym: L.Skorski@cfs.coop
Head of the FCA is Martin Wheatley: firstname.lastname@example.org
The Treasury Select Committee: email@example.com
Sir Christopher Kelly (heading Co-op inquiry): firstname.lastname@example.org
Chief Executive of the Co-operative Group Euan Sutherland: Euan.Sutherland@co-operative.coop
Lord Myners (Labour)
To ask Her Majesty’s Government what assessment they have made of the impact of the absence of warnings from the Financial Services Authority or the Bank of England on the market in the bonds of Co-operative Bank; and why the regulators made public their concern about the capital shortfalls at Barclays and Nationwide but did not in the case of the Co-operative Bank.
To ask Her Majesty’s Government whether they are currently investigating, or have plans to investigate or cause to be investigated, whether employees of the Cooperative Group or Cooperative Bank gave assurances to retail savers and investors in the bonds and preference securities of the Cooperative Bank that might have misrepresented the capital status of those investment instruments and constituted the making of a guarantee by the Cooperative Group.
To ask Her Majesty’s Government whether the Cooperative Group or the Cooperative Bank or their directors and employees are or will be investigated for allowing a false market in securities issued by either body; whether the Financial Services Authority’s role will be investigated in respect of the same issue; and, if so, by whom.
To ask Her Majesty’s Government when the Cooperative Group and its directors and officers were last assessed as to being fit and proper to own and manage a bank; and by whom.
To ask Her Majesty’s Government whether they intend to ensure that retail investors in securities issued by the Cooperative Bank receive advice in connection with the recapitalisation of the bank from an adviser or advisers independent of any firm advising the Cooperative Group and Cooperative Bank and its directors and officers; and, if so, whether they will protect such advice and its disclosure to investors from any interference by the Group or Bank.
To ask Her Majesty’s Government whether they are taking steps to review whether the Cooperative Bank has breached threshold conditions as a bank by failing to make interest payments to bond and preference shareholders in accordance with the deeds under which such instruments were issued to savers.
To ask Her Majesty’s Government whether they plan to investigate whether the suspension of interest payments to holders of Co-operative Bank accounts constitutes unfair treatment of customers; and whether they will take action to ensure that such investors receive independent advice from a competent firm on the proposed capital reconstruction.
6 August 2013: PRA response to Lord Myner's questions
13 August 2013: FCA response to Lord Myner's questions
2 July 2013: Treasury Select Committee Hearing
Hoc Treasury Committee 2 July 2013
around 2:06:45 in clip
Check with original before relying on anything quoted.
Norman: [to] Mr Tucker - Why has the CPG not been asked to make good the losses as the equity share holder in the CPB?
[passed to Bailey by Tucker as micro supervisor]
Bailey: We've identified the capital shortfall and we have put it to the CPG that they have to solve this problem because there's no evidence to suggest that they don't have the resources at their disposal, defined broadly. They have come up with the approach that the CPG is putting resources in to this.
Norman: No but it's not absorbing all of the losses.
Bailey: No it is not.
Norman: It is in effect the bondholders who are being wiped out.
Bailey: It's a conversion actually into equity. It's something you need to ask the CPG. It's a combination of resources from the CPG and bondholder conversion which creates core T1. The key point for us is they're short of core T1; they have other tranches of capital instruments which sit below that - they have lower T1 capital and subordinated debt.
Tucker: [adds from resolution perspective] Where a non-financial group owns a bank and the bank fails there is a resolution tool-kit [which] will include being able to wipe out the equity and then write down the debt of the bank and convert part of the debt of the bank into equity so that the debt holders becomes the new owners.
Norman: So in other words the situation is that the PRA could if it wished require the CPG to make good the full value of the equity loss, if it didn't accept the reconstruction plan being offered.
Tucker: No, no, the solution is always to put the losses onto the ... In general, not talking about this particular situation, if the owners won't or can't make a bank whole then the resolution tool-kit essentially involves putting the losses in order of the creditor hierarchy: equity, sub debt, senior unsecured bonded debt and they become the new owners.
Norman: Do you think it's unethical for an institution to walk away from its ownership position?
Bailey: Well they're not walking away from it; they are diluting their ownership position quite substantially.
Tyrie: They are letting the bondholders taking a bigger hit. This is inconsonant with the creditor hierarchy Paul Tucker mentioned.
Tucker: The traditional view of a bank is that owning a bank is a serious thing to do and as an owner of a bank you should expect to stand behind the bank. Where that is not possible then resolution beckons as the solution. If you can mimic that through an exchange offer then that is a better solution still.
Norman: OK but haven't the bondholders got a right to feel a bit aggrieved?
Tyrie: I don't think the owners have taken a proportionate hit, indeed the first hit that they might otherwise reasonably have been expected to do.
Bailey: I think this is a discussion you must have with the management of the CPG.
Tyrie: But I'm asking your view.
Bailey: What they've done is what you see in the non-financial corporate world which is that they've proposed a restructuring which involves the owner putting in money and the bondholders being converted. I really do think you have to talk to them [CPG] about the structure of it.
Norman: But one might expect the CPG of all institutions to not obey the Wall Street rule and just walk away from their investment. You'd expect them to bear the full responsibility of their ownership.
Bailey: Well they obviously have choices to make. I do think you have to discuss those choices with the management of the CPG.
1 July 2013: Questions asked in House of Lords by Lord Myners and Lord Rooker
Banks: Co-operative Bank
Asked by Lord Myners
To ask Her Majesty’s Government, further to the proposed recapitalisation of the Co-operative Bank, what assessment they have made of the impact in terms of loss burden of ranking private investors in preference shares ahead of other shareholders. [HL972]
The Commercial Secretary to the Treasury (Lord Deighton): This is a matter for Co-operative bank in discussion with its bondholders. The detail of the proposal is yet to be finalised. The Co-operative has stated that the exercise is intended to ensure the group and investors in the bank’s subordinated capital securities make a joint contribution to the recapitalisation of the bank.
1 July 2013 : Column WA180
Asked by Lord Myners
To ask Her Majesty’s Government what steps they will take to ensure that retail investors in the Co-operative Bank subordinated securities receive advice independent from that provided to the boards of the Co-operative Bank and Co-operative Group in relation to the proposed flotation; and what steps they will take to ensure that those investors’ position in the Bank’s capital structure will be reflected in the decision-making process.[HL1041]
Lord Deighton: The Co-operative bank's liability management exercise, announced on Monday 17 June 2013, is a matter for the bank itself in discussion with its bondholders.
The Financial Conduct Authority (FCA) is responsible for ensuring that Co-operative bank acts to protect the interests of its consumers and as part of its supervisory work continues to ensure retail customers are given full consideration in the liability management exercise.
The UK Listing Authority is responsible for ensuring that Co-op complies with relevant listing requirements.
Britannia Building Society
Asked by Lord Rooker
To ask Her Majesty’s Government which financial regulator approved the purchase by the Co-operative Bank of the Britannia Building Society.[HL1022]
The Commercial Secretary to the Treasury (Lord Deighton): The purchase of the Britannia Building Society by the Co-operative Bank was approved by the Financial Services Authority.
The 2009 cessation accounts for Britannia stated: The Board determined the overall risk appetite strategy and owned the Individual Capital Adequacy Assessment Process, the business’s own review of how well its capital resources met its expected needs, as required by the Financial Services Authority. The total group capital was reported as 14.1% (2008: 13.8%) under the Financial Services Authority’s new capital adequacy requirements.
Co-op Group accounts 2010 stated: “The Bank has also considered a number of stress tests on capital and liquidity and these provide assurance that the Bank is sufficiently capitalised and is comfortably in excess of liquidity stress tests”. Tier 1 capital was reported at 9.6% (2009 8.7%).
Co-op Group accounts 2011 stated: “The Banking Group mainly comprises The Co-operative Bank plc, CIS General Insurance Limited and Co-operative Insurance Society Limited which are regulated entities. Their submissions to the FSA in the period have shown that these individually regulated operations have complied with all externally imposed solvency requirements throughout the period. Tier 1 capital reported at 9.6% (no change).
Co-op Group accounts 2012 stated under the going concern considerations -
1. The Director’s assessed the Trading and Banking Groups separately as they are separately funded.
2. The Trading Group had sufficient resources to operate within the level of its current facilities, including compliance with all financial covenants and concluded that the going concern assumption remains appropriate.
3. In the Banking Group the going concern assumption was carefully considered due to the heavy losses incurred from exceptional charges – write down of asset values. They concluded the Bank’s capital position remained acceptable with a period end core tier one position of 8.8% (31 December 2011: 9.6%).
4. The Board recognised the need to build the capitalisation of the Bank to provide increased resilience and capacity for future growth and took action in early 2013 to improve the position to 9.2%. Current forecasts indicate that the Bank’s capital will remain above regulatory requirements over the period of the Plan. However, in response to the impact of new Basel III regulations and the expectation of a prolonged economic downturn, we are reviewing our business with the intent of improving our profitability and capital position. Without management action, compliance with regulatory capital requirements would come under pressure. Bank liquidity has been reviewed by considering the latest liquidity forecast for 2013–2015, as well as the stress testing results from period end for internal liquidity assessment, together with the Bank’s compliance with its regulatory required levels. The evidence from stress testing as at period end shows that sufficient liquidity levels can be maintained under the most severe scenarios. This is also documented in the Individual Liquidity Adequacy Assessment (ILAA).
Letter from Neville Richardson (22 January 2014), including draft script for conversations with Paul Flowers, Rodney Baker-Bates and Peter Marks, July 2011
Written evidence (minutes of FSA meetings with Co-op Bank) submitted to the TSC by Andrew Bailey - 14 Jan 2014
Oral Evidence from Reverend Paul Flowers, former Chair, the Co-operative Bank, and former Deputy Chair, The Co-operative Group
Evidence given by David Anderson, former Chief Executive, Co-operative Financial Services - 19 Nov 2013
PRA response to FoI request concerning stress tests - 31 Oct 2013
FCA response to Lord Myner's questions - 13 Aug 2013