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Spend & Save

Julian Knight: It's full stop at the Co-op as banking plans come apart

And now the 'super-mutual' faces struggle to survive as a mutual at all after downgrading

Make no bones about it, the down- grading of the Co-op Bank by credit agency Moody's and sudden departure of its chief executive Barry Tootell is serious.

The "super-mutual", as it has been dubbed, is about to enter one of the most difficult periods in its long and distinguished history.

Clearly the departure of the chief executive is a damning indictment of his business strategy, which was to take advantage of the Co-op brand and the weakness of the building society sector and grow the group into a rival to the other mutual behemoth Nationwide.

But the warning from Moody's that the Co-op Bank may need more capital shows that Icarus-like Tootell and his team have tried to soar too high. I don't know the ins and outs of the Co-op's balance sheet but the fact that it is Moody's that has downgraded brings me up short, as out of all the credit agencies they have the reputation of being very cautious.

The problem for the Co-op though seems pretty clear - the swallowing of the Britannia building society and its loan book seems more difficult than first thought.

The economy is of course sluggish – but this hasn't stopped some banks doing very nicely thank you – and amongst Co-op customers, who tend to be slightly lower- income than the likes of say HSBC, there is a seemingly steady and interminable financial squeeze on.

For a long time in the UK, savers have been subsidising borrowers – to the tune of £100bn-plus since the financial crisis broke – but those with debts have still been unable to pay down their borrowings.

They are hanging around necks and I believe that this applies disproportionately to Co-op customers, hence Moody's warning on the balance sheet.

So if you are a Co-op Bank customer should you be worried?

Well firstly your money is safe, as deposits are protected to the tune of the first £85,000. In fact protection has been improved since the run on Northern Rock in 2007. So there is no need to turn up at your branch with savings book in hand.

However, longer term the Co-op will have to change course and perhaps even change ownership. In recent weeks the financial squeeze has led to it pulling out of buying 600-plus branches of Lloyds TSB.

It is safe to say that at the very least the bid to become one of Britain's major banking players is at an end for the Co-op.

The question isn't whether it can live up to its "super-mutual" status, rather whether it can remain a mutual at all. I said it was serious.

A bonzer idea from Brussels

I was very interested to see Sheila's Wheels post some bonzer numbers this week. It seems the death of female-focused insurers at the hands of the EU gender directive was well and truly exaggerated.

The self-proclaimed "pinkest, most sequined" brand on the block has 95 per cent female drivers, despite no insurer being allowed to offer discounts to drivers on the grounds of gender alone any more.

In what is clearly a victory of brand over reality, though, Sheila's is celebrating because in the main female drivers have fewer and less costly accidents than men.

As a result, Sheila's has the freedom to charge more than it used to – due to not being allowed to offer a discount for gender – for exactly the same service and extra profitability is entirely imposed on them because of the EU rule.

For Sheila's Wheels and other female-focused insurers the EU bureaucrats may have proved a bit of a boon for once.

Keep on cracking down

Police have raided premises in London and broken up a suspected pension unlocking or "liberation" scam, cold calling pension holders with fraudulent offers that could lead to them being fleeced.

This underground industry, believed to be worth £400m a year, puts the pension cash in very high-risk or non-existent investments, leaving victims destitute.

It's thoroughly unpleasant and it's good to see a firm line being taken. Let's hope it is the shape of things to come.