There’ll be more than jaws dropping at the Co-op Bank before too long

Outlook:

OUTLOOK: Co-op’s beleaguered bank is often held up as proof that things have changed in the world of financial services.

Here, it has been said by many eminent people, is an institution that was broken but has been put on its feet again without recourse to public funds. 

Unfortunately the good news story so many were pinning their hopes on needs to be put on hold because the Co-operative Bank is not co-operating. It’s back on the critical list. 

Another £400m has to be raised from investors to keep the show on the road after the new management found a JCB full of dirt that we didn’t previously know about. 

The problems range from simple lapses in record keeping, to the need for more funds to cover compensation for those mis-sold payment protection insurance or interest rate swaps, to “technical” breaches of the consumer credit act. Oops. 

The extra costs on issues like, which have been identified by the bank’s “liability management exercise”, are jaw dropping. So much so that jaws will be on the floor. Using such a bland corporate term for this appalling mess is akin to describing radiation as magic moonbeams. 

What should be keeping chief executive Niall Booker and his regulators awake at night is the question of what happens if the hedge funds who bailed the thing out last time decide not to throw good money after bad. It’s not as if the Co-operative Group is flush with cash it could throw into its bank’s hat, and who else in their right mind would invest in a ship that has a hole below the waterline that everyone thought (and were told) had been more or less plugged. 

There’s a similarly burning question for Co-op’s depositors, and that should be just as worrying for the men at the top: Why hang around and put your money at risk while they sort this one out. 

It’s true that the bank’s key stakeholders are a way from throwing in the towel. And even were that to happen, there is a compensation scheme covering nearly all deposits. 

But do its customers really want to rely on that when finding a new home for their money has never been easier thanks to the shiny new account switching service that the Payments Council is overseeing?

There are many Co-op depositors who may feel that the rational decision is to put it to the test. All the evidence suggests that switching accounts is now very much easier than it used to be. Co-op and its regulators need to be alive to the unintended consequences of that. 

Experience counts – and it costs money, too

 Co-op is far from the only problem facing the City’s watchdogs. It might not even be the biggest.

The National Audit Office yesterday issued a report on both the Prudential Regulation Authority and the Financial Conduct Authority, and the really worrying issue it flags up is the level of staff turnover. More than a third of the FCA’s staff have been with the watchdog for less than two years. A quarter of those walking out of the PRA’s offices at the Bank of England (its parent) are top performers. Just the sort of people, in other words, whom it really needs to keep. Ideally, a regulatory body should have people around who have experienced multiple crises so they know how best to react when the next one hits. But at this rate, the PRA and FCA are running the risk of not having good people in place who were around for the last one, let alone earlier ructions.

Inexperienced staff make mistakes. This is inevitable; in fact it is the only way they learn. The impact of these errors can be ameliorated if there are experienced people around to nip problems in the bud. It’s when those people aren’t around that things get dangerous.

In addition to demanding that they demonstrate value for money, the report blandly recommends that the watchdogs “review the effect” that the turnover rates are having and then tailor their offers to “reflect the target turnover rate”.

The reality, unpalatable as it may be, is that the regulator may simply have to pay more. Not so much at the senior levels. There is simply no way they can compete with the millions big banks can offer to entice regulators to join their overpaid corps of executives.

No, the real need for action is at middle levels, among those who do the day-to-day work of overseeing the biggest, and most risky, financial institutions.

The regulators are funded by the financial services industry and the NAO’s report notes that the latter is worth an estimated £234bn.

Given how its leaders are always banging on about the importance of paying up to retain “top talent”, they surely wouldn’t object to paying a little more for some of that talent to stay with their regulators … As they should know, sometimes getting value for money means paying a bit more.

The solution for ailing Albemarle? A pawn shop!

 The pawnbroker Albemarle & Bond has fallen on the hardest of times. Its shares are effectively worthless and it’s now running a very real risk of being thrown out of work. In the meantime it desperately needs credit, but the banks are saying no.

Does that sound at all familiar? Fear not, there is a solution. Albemarle is not without assets. It has a lot of shopfronts, and decent gold reserves, too. Perhaps, then, it should practise what it preaches by loading up a skip and taking the lot down to the nearest pawn shop.

It’ll probably find that the interest charges on any loan it is offered are quite high. But if the company comes through this crisis, it will at least gain an understanding of how its customers feel.

Sport
footballLIVE City face Stoke, while Warnock returns to Palace dugout
Life and Style
3D printed bump keys can access almost any lock
gadgets + techSoftware needs photo of lock and not much more
News
Paul McCartney backs the
people
News
i100
PROMOTED VIDEO
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

£50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone