Bondholders claim elderly lose £3m a day due to Co-op plans
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.
Associate Business Editor
Saturday 10 August 2013
Bondholders have launched a fresh assault on the Co-op Bank and its regulators over plans to recapitalise the beleaguered business, warning that pensioners are collectively losing as much as £3m a week through panic selling.
In an open letter to the Bank of England’s Financial Policy Committee, Mark Taber, who is leading the Co-operative Retail Bond Investors Campaign, blasts “numerous attempts to deny responsibility, to pass the buck to other authorities”.
His letter urges members of the FPC to “work together to find a solution” to help an army of 15,000 retail bondholders, many elderly and reliant on income from the bonds’ coupon that will no longer be paid ahead of their conversion into shares. The business will still be majority owned by the Co-operative Group when it joins the stock market.
It is putting in £1bn, while the bondholders will effectively stump up about half that for a third of the equity. The Campaign says it is wrong to characterise the listing as “the only option” for the bank arguing that the Co-operative Group still has assets which it could use to support the bank.
It also maintains that the bank does not need the full £1.5bn demanded by the Bank of England’s Prudential Regulation Authority to meet capital rules, and could anyway look at other options such as making further disposals.
Mr Taber said he feared that the insistence by the Co-op that the current plan was the only viable option meant some pensioners selling bonds into the market at the worst possible time.
He said in the letter: “The retail investors, who are innocent victims of past inaction, are being caught in the middle with no one appearing to take responsibility for their plight.
“Based on recent reported trades we estimate real losses of about £3m a week are being realised by such sellers.”
The PRA hit back, saying it has responded in detail to the concerns Mr Taber raised in his correspondence. “We are not going to enter into ongoing correspondence on matters we have already responded to,” a PRA spokesman said.
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