As the High Street Banks fade from the High Street, with some behaving shamefully as bully banks, I am delighted that new entrants are springing up. I am backing Atom Bank in the North East but we are also working really hard to support the existing Northumberland Credit Union and to expand community banking in Tynedale. In addition true Co-Operatives are still rightly supported in our communities and I do not believe that the disastrious exploits of Paul Flowers is stopping people committing to local community cooperatives and lending by local institutions not multinationals based hundreds of miles away where always the computer says no.
I recorded a piece for the BBC Look North yesterday on this issue and the papers are telling the story of the many new national and local banks springing up all over the country:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10952024/FCA-Dozens-of-banks-spring-to-life-after-red-tape-cut.html
Showing posts with label Co-Op. Show all posts
Showing posts with label Co-Op. Show all posts
Thursday, 10 July 2014
Saturday, 10 May 2014
The Co-Op is in big trouble and needs to take the doctors medicine
The Myners Report into the Co-operative Group has been published this week
The situation is not good. Following the discovery of a £1.5 billion black hole in their finances, followed by the Paul Flowers ‘crystal Methodist’ scandal, the Co-op commissioned the former City Minister Paul Myners to look into the group’s problems and put together a restructuring plan to make it sustainable and properly governed. The Spectator has done a list of the 5 key things you need to know from the 180-page report:
1. The Co-op group is still ‘manifestly dysfunctional’
Lord Myners is not impressed with the current state of the Co-op Group and warns it needs to radically change ‘soon’ or face breaking up. The report suggests there are still ‘deplorable governance failures’ and that the board is ‘still stuck in denial over this near ruinous failure of governance’. The scale of the change required to reshape the group is significant and throughout the report, Myners hints he isn’t confident the group will accept the speed and scale of reshaping necessary.
2. A smaller board should be adopted
The report states that the current board of the Co-op group is ‘not competent’ to perform the duties expected of it and there is ‘limited shared purpose among group board directors’. Myners blamed the board directly for the group’s troubles:
‘It is one of the great national business calamities and it is being led by a board totally unable – because of a lack of experience – to hold them to account’.
To replace the current bottom-up structure — the Co-op has 48 area committees with ~10 members, who in turn elect seven regional boards with 15+ members — Myners proposes a board with six or seven independent directors, two executives as well as a separate National Membership Council, to body to handle the concerns of members.
3. There should be a greater focus on being profitable
The group presently appears to have polarising priorities. As one anonymous shareholder told Myners:
‘Some want a dividend, some want low prices, some want to do social good and some want free range chickens.’
Obviously, the Co-op is a cooperative, which is not necessarily designed to maximise profit. But the report argues that the future safety of organisation’s financial health ‘can only be restored through steady, step by step, rebuilding of the Group’s profitability and repayment of its excessive debt’.
4. There is no easy route to fixing the group
With 90,000 employees and 600 elected members, the group has a lot of stakeholders shouting their concerns, including many with distinct ideas about how the group should change. In his summary, Lord Myners warns:
‘There is no short cut to recovery from its present weakened state. It will require retrenchment and some painful choices. After 150 years of development, and an extended period of financial decline, the organisation has seen more than half of its net assets wiped out in the past five years’
5. Shareholders will decide whether to back the reforms on 17 May
For my part I wish the Co-Op well. I am huge fan. But it has been run terribly for some time. There is a massive place for Mutuals, Building Societies, Co-Operatives and Credit Unions as the banks head away from the High Street in particular. But the Co-op is not helping would be applicants or the publics trust by not taking the medicine.
The situation is not good. Following the discovery of a £1.5 billion black hole in their finances, followed by the Paul Flowers ‘crystal Methodist’ scandal, the Co-op commissioned the former City Minister Paul Myners to look into the group’s problems and put together a restructuring plan to make it sustainable and properly governed. The Spectator has done a list of the 5 key things you need to know from the 180-page report:
1. The Co-op group is still ‘manifestly dysfunctional’
Lord Myners is not impressed with the current state of the Co-op Group and warns it needs to radically change ‘soon’ or face breaking up. The report suggests there are still ‘deplorable governance failures’ and that the board is ‘still stuck in denial over this near ruinous failure of governance’. The scale of the change required to reshape the group is significant and throughout the report, Myners hints he isn’t confident the group will accept the speed and scale of reshaping necessary.
2. A smaller board should be adopted
The report states that the current board of the Co-op group is ‘not competent’ to perform the duties expected of it and there is ‘limited shared purpose among group board directors’. Myners blamed the board directly for the group’s troubles:
‘It is one of the great national business calamities and it is being led by a board totally unable – because of a lack of experience – to hold them to account’.
To replace the current bottom-up structure — the Co-op has 48 area committees with ~10 members, who in turn elect seven regional boards with 15+ members — Myners proposes a board with six or seven independent directors, two executives as well as a separate National Membership Council, to body to handle the concerns of members.
3. There should be a greater focus on being profitable
The group presently appears to have polarising priorities. As one anonymous shareholder told Myners:
‘Some want a dividend, some want low prices, some want to do social good and some want free range chickens.’
Obviously, the Co-op is a cooperative, which is not necessarily designed to maximise profit. But the report argues that the future safety of organisation’s financial health ‘can only be restored through steady, step by step, rebuilding of the Group’s profitability and repayment of its excessive debt’.
4. There is no easy route to fixing the group
With 90,000 employees and 600 elected members, the group has a lot of stakeholders shouting their concerns, including many with distinct ideas about how the group should change. In his summary, Lord Myners warns:
‘There is no short cut to recovery from its present weakened state. It will require retrenchment and some painful choices. After 150 years of development, and an extended period of financial decline, the organisation has seen more than half of its net assets wiped out in the past five years’
5. Shareholders will decide whether to back the reforms on 17 May
For my part I wish the Co-Op well. I am huge fan. But it has been run terribly for some time. There is a massive place for Mutuals, Building Societies, Co-Operatives and Credit Unions as the banks head away from the High Street in particular. But the Co-op is not helping would be applicants or the publics trust by not taking the medicine.
Monday, 14 April 2014
The Co-Op is courting danger-it bought a dog & now wants to bark itself
Mutuals are wonderful things and I am a huge supporter but the Co-Op has got to watch out. If it does not steady the ship it will start to founder. And once again the regional board members are not keen to accept the restrcturing plan.
To misquote Oscar Wilde to lose one man who was asked to sort the troubled mutual out – [chief executive Euan Sutherland] - and then lose another in a matter of weeks [this time key director Lord Myners] smacks of a rudderless organisation. It could mean it does not pay the £383 million it owes as part of the bank’s ongoing recapitalisation programme, and potentially a lot more.
I stress that I wish the Co-Op well. But it has lost over £2 billion and is not listening to those who could actually save it. The way Sutherland was dealt with was totally wrong, and the Co-Op members should be furious with their board members. If the mutual does not sort itself out it will need to go cap in hand to shareholders to raise the additional money owed, and see the Group’s current 30% stake diluted further. The remaining 70pc of the Bank’s shares are owned by a number of debt and hedge funds.
Myners announced last week that he is to leave the board of the Co-op Group at the annual meeting in May, when his proposed corporate governance reforms will be voted upon.
The reforms propose the creation of a two-tier board structure and the recruitment of City-style non-executive directors - but at last week’s board meeting all regional board representatives are understood to have rejected the reforms. The probolem is that medecine never tastes nice.
The rift threatens to derail the restructuring process initiated by Mr Sutherland on his arrival in May 2013. The sad reality is that this is a mutual which has been poorly mismanaged for some time, and the regional directors need to recognise that if they continue to reject the rescue plans there will be nothing left to salvage. And that would be a tragedy, because what we do need are well run mutuals. For too long that has not been a fair description of the Co-Op.
You bring in people to turn something around and then ignore and obstruct them. Not clever. It is like going to the doctors and telling them they got the diagnosis wrong, or buying a dog and barking yourself.
To misquote Oscar Wilde to lose one man who was asked to sort the troubled mutual out – [chief executive Euan Sutherland] - and then lose another in a matter of weeks [this time key director Lord Myners] smacks of a rudderless organisation. It could mean it does not pay the £383 million it owes as part of the bank’s ongoing recapitalisation programme, and potentially a lot more.
I stress that I wish the Co-Op well. But it has lost over £2 billion and is not listening to those who could actually save it. The way Sutherland was dealt with was totally wrong, and the Co-Op members should be furious with their board members. If the mutual does not sort itself out it will need to go cap in hand to shareholders to raise the additional money owed, and see the Group’s current 30% stake diluted further. The remaining 70pc of the Bank’s shares are owned by a number of debt and hedge funds.
Myners announced last week that he is to leave the board of the Co-op Group at the annual meeting in May, when his proposed corporate governance reforms will be voted upon.
The reforms propose the creation of a two-tier board structure and the recruitment of City-style non-executive directors - but at last week’s board meeting all regional board representatives are understood to have rejected the reforms. The probolem is that medecine never tastes nice.
The rift threatens to derail the restructuring process initiated by Mr Sutherland on his arrival in May 2013. The sad reality is that this is a mutual which has been poorly mismanaged for some time, and the regional directors need to recognise that if they continue to reject the rescue plans there will be nothing left to salvage. And that would be a tragedy, because what we do need are well run mutuals. For too long that has not been a fair description of the Co-Op.
You bring in people to turn something around and then ignore and obstruct them. Not clever. It is like going to the doctors and telling them they got the diagnosis wrong, or buying a dog and barking yourself.
Sunday, 24 November 2013
The sad demise of the Co-Op Bank shows why we need local community banks
If ever we needed reminding of why the German Bank Model of the Sparkassen - in the form of local community banks that look after their area and who do not do speculative and risky lending - then the disaster of the Co-Op is the best guide. First and foremost, this is a disaster for members. On this point I will finish but let us first look at the history.
In years gone by, the Co-op, that pillar of the mutual ideal, was seen as reassuringly solid, and secure. Its shops and funeral services were deliberately lacking in ostentation. Its bank was boring, too, regarded by the outside world as a risk-averse repository for the monies of charities, non-governmental organisations and people who didn’t really like the idea of banks – but accepted the need to have one.
When the banking sector crashed in 2007 the staff and customers of the Co-operative Bank could stand back, tut-tut and shake their heads, sure in the knowledge that their forebears, the thrifty weavers who in 1844 created the Rochdale Society of Equitable Pioneers, were up there in heaven, shaking their heads, too. And then along came Paul Flowers. Rarely does that insatiable beast known as the 24-hour news cycle enjoy fare as rich as the Reverend Paul Flowers. Clerics have often been exposed as possessing feet of clay but the rotund Methodist minister, former Labour Councillor, advisor to Ed, director of the Co-Op Bank in 2009, and its chairman shortly thereafter, before becoming the architect of the Bank's downfall ... is in a league of his own. I genuinely do not know where to start on his fall from grace.
However, he has my sympathies, because when the media get their hooks into you it is not pretty, whatever his misdemeanours. I am certain he has very good qualities and will be very sad now.
But the reality is that the UK mutual sector is now damaged by two spectacular collapses. The UK’s oldest mutual insurance company, Equitable Life, was brought low by promising more than it could afford to pay out to policyholders and savers. I have spent countless days as an MP trying to help those who lost their life savings in Equitable Life. The mutual sector’s largest bank, the Co-op, has just reported large losses, insufficient capital and a Chairman who lacked the qualities of mind and character to be a successful bank chairman. It is not bust but in real trouble needing a bail out.
Noone could have a problem with a good well run mutual. This recent history should, however, be a warning of the special risks mutuals can pose. With no shareholders to provide capital and insufficient conventional profit reserve some financial mutuals can be very risky. However, if anyone came to our London Local Banking Conference will know – there are always dangers when the pursuit of profit becomes the motive of the business. Profit should result from a good service, knowing your customer and knowing your market. I again make the point that not one of the German Local Banks went bust and have actually increased bank lending in the recession.
As to the Labour party, Ed Miliband has to answer for the millions of unpaid Co-Op lons to the Labour Party, the £50,000 donation to Ed Balls, and why these moneys are linked to the recent meetings with Flowers. As to Balls the scene last Wednesday with my colleague Jason McCartney, who is a Co-Op member had to be seen to be believed. For my part this does, however, strengthen the case for Local and Community banks - not weaken it.
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