Is the Co-op Bank a Sinking Ship?

I got a letter from my bank the CO-OP Bank which we have been with for quite some time. They were thanking me for sticking shutterstock_87675700with them presumably because we hadn’t deserted a potentially sinking ship. I chose the CO-OP bank because of its ethical stance and this image of course was shattered when the revelations surrounding Flowers were revealed in a very tawdry fashion. Not to overplay the ship analogy but we are now to understand that the captain has now jumped ship saying the crew and the ship itself cannot be controlled. It makes you wonder what is going to happen next and as a customer, I am becoming extremely nervous about the whole situation.

I am of course referring to the resignation of the chief executive officer Sutherland resigning three days ago. Part of his resignation letter to the newly appointed Chairwoman it appears was due to the ‘resistance’ internally to the professional and commercial governance required to ensure secure growth. The CO-OP is or of course was a huge trusted brand in a wide range of services and really needs to get its house in order as has been clearly demonstrated with the appointment of Flowers. Clearly, it could be argued that there was a political influence making itself known too but to say publically now that Paul Flowers was ‘seen as the perfect appointment at the time’ is yet another PR cock up. True or not why say it? It simply demonstrates the naivety of the senior people steering the CO-OP ship or at least on the bridge.    

As a customer, I do not want to be told they thought Flowers was the perfect choice I want them to keep their mouths shut and focus on getting the CO-OP back to being the trusted brand and keeping it solvent always was. What does it say about the judgement of these people? Frankly, I want them making sure my money is safe not confirming to me how wrong they have been in the past.

Now, the chances of the bank going bust are questionable but the bank is clearly verging on insolvency with its debts mounting almost daily.

What is clear to me as someone who advises large medium and small businesses about insolvency and cash-flow problems is that the CO-OP needs to restructure itself and split up the constituent parts. Funeral homes can no longer be aligned with banking and retail should be hived off elsewhere. These may be unpalatable words but they need to be said and why not split the banking apart and replace members with shareholders?

Any company wishing to remain solvent and transacting business in the UK must not only grow in size it must develop its processes and infrastructure to cope with the 21st century needs of business. 

Memberships are fine with retailing and funeral homes but it is very difficult align as the building societies grow in size. The Nationwide http://www.nationwide.co.uk/ are the exception to the rule and financially strong but they have their own problems as recently as 18 months ago. Maybe there is the possibility of a merger there who knows? What is clear is these financial member organisations are going to find it increasingly difficult to compete given the Basel accord financial and solvency rules going forward so the CO-OP must bite the bullet sooner rather than later. The key problem for the banking side in my opinion is part financial and part cultural and whilst they may be able to do something about the cultural – the bank will need to find additional capital from somewhere.
My suggestion for what it is worth to sell off some of the fantastic assets the CO-OP has got the internal structure and governance in place and to get on with this quickly. Like many customers, I will give a little leeway, but back to the shipping analogy, I do not want the CO-OP to turn into another Titanic when I am a passenger. 
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