OUTLOOK: Saviour is needed urgently as Co-op Bank faces being stripped of its name
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Thursday 21 November 2013
Outlook The Co-operative badly needs the City to cough up another Libor scandal to divert attention from the escalating woes of its bank before they derail the latter's rescue plan. That is now a very real danger, one that was potentially compounded yesterday by the intervention of the business secretary Vince Cable.
He warned that he could strip the bank of its right to use the "Co-operative" name because the behaviour of former chairman Paul Flowers clearly violates the principles that are theoretically enshrined within it.
You might think he made a very good point, and not just in relation to Mr Flowers' reprehensible conduct. The low politics that allowed a man who was out of his depth – when not out of his head – to ascend to that position required the collusion of others.
In fact, there was incompetence and hubris aplenty at the top of the organisation, even if you take the Methodist minister and his sins of the flesh out of the equation. That can be seen in the testimony of those so far called before the Treasury Select Committee as part of its inquiry into the collapse of the Co-op's attempt to buy Project Verde from Lloyds Banking Group.
However, Mr Cable's intervention is problematic for two reasons. First, his timing couldn't have been much worse. Mr Flowers' misdeeds are a sideshow when compared to the very real financial crisis engulfing the Co-operative Bank.
Such a debate would have been far better off left until after the proposed rescue plan has been secured. A plan, remember, that is still contingent on the backing of hedge funds.
But taking such a step, which Mr Cable has the right to do under the Companies Act of 2006, might not be such a clever move even if the deal gets done.
As he has identified, the sad thing about this affair is how badly out of step the behaviour of Flowers, and probably others, was when set against what the Co-operative movement stands for.
Without it, what do you have with the bank? A small, distressed, institution trying to compete with four giants and a small number of "new" players with clean balance sheets and big ambitions. How long do you think Scandal Bank plc would last before finding itself in another crisis? Five years? Three?
No, the Co-operative Bank without the Co-operative name is doomed. With it, it has a shout if it acts quickly. It badly needs to demonstrate to customers that what they thought they were buying into can be made into a reality that they can see and touch.
While the chairman should clearly be someone with experience in the banking business (in Richard Pym it has that), the appointment of some other new non-executive directors who could be trusted to act as guarantors of the Co-operative ethos might help to prove that it means to turn over a new leaf far better than lofty talk about what will be enshrined in its constitution. One name that comes to mind is Sir Brendan Barber, the former TUC general secretary-turned-chairman of the conciliation service Acas.
Some would call him a political appointment. But there is a commercial imperative there: someone like Sir Brendan might just be able to persuade the Co-operative Bank's idiosyncratic customers that it will in future live up to its lofty ideals, even under the ownership of hedge funds.
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