The Bank of England has cause to be grateful to the Co-operative Bank’s unusual customer base. Co-op, remember, is the “nice” bank, the one people go to if they don’t want their money lent to nasty regimes, eco-unfriendly organisations, companies that exploit workers.
These people are likely to stick with it despite Moody’s warning that it may need “external” support (a bailout to you and me, from either the Government or the wider Co-operative Group) if its commercial property losses worsen.
Co-op says it’s working to plug a finance hole which could be as much as £1bn. Moody’s says it isn’t doing enough.
If a bank looks shaky there are good reasons for pulling out: customers with less than £85,000 on deposits know they’ll get their money back under depositer protection. But would you want to have to wait weeks or months?
Co-op customers, however, are unusually attached to their bank – which rather gets the Bank of England off the hook. It runs the Prudential Regulatory Authority, which was staying mum yesterday, as the Bank is wont to do.
“We don’t comment on individual companies,” I was haughtily informed. That’s not good enough. The Bank ought to have said something to reassure. Nobody wants a repeat of Northern Rock. Runs on banks are dangerous. A word or two from the Bank of England would have calmed any lingering fears.
Co-op doesn’t look to be going the way of the Rock. Luckily for its regulator, its loyal customers will ensure that remains the case.