The Co-operative Bank, which is only 20 per cent owned by the Co-operative Group, announced on Monday that it was putting itself up for sale after warning that its capital reserves were falling below the level required by regulation. The loss-making bank has been struggling to raise finances due to record-low interest rates. The offer for sale is a last-ditch attempt to avoid the winding up of the company.
The Co-op Bank has struggled financially since its takeover of Britannia Building Society in 2009 and subsequent exposure to bad property loans. In 2013, a £1.5 billion deficit in its accounts led to it needing to be rescued. Its chairman Reverend Paul Flowers resigned in 2014 when following concerns about expenses and his involvement in a sex and drugs scandal. Nearly £2 billion was invested in its bailout by US hedge funds in 2013 and 2014 and these institutional investors are now suffering significant losses.
Some ‘challenger’ banks, including TSB, as well as private equity companies have showed interest in the sale of the bank. It is aiming to sell off the business as a whole, instead of as individual portfolios. Some believe that the company may find it difficult to maintain its ethical business model, which includes refusing to deal with payday lenders and fossil fuel companies, in the event of a takeover by another bank.