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.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project