The Co-op Bank is dying slowly. How did it come to this?

The Co-op Bank managed to turn a weak position into a terminal one

One of the many harsh truths about the Co-operative Bank is that it was never much of a player on the high street, even in its pomp. It appealed, in the main, to leftish students, card-carrying members of the Labour Party and, to be fair, anyone who had much of a conscience about investing in arms, tobacco, alcohol, pornography, apartheid-era South Africa and the like – a depressingly small clientele, as it turned out.

Now even the traditional relationship between the Co-op Bank and the Labour Party seems to have broken down. Ethical, and sympathetic to Labour it certainly was – many Labour MPs are sponsored by the “Co-operative Party” – but the Co-op Bank was never able to put up much of challenge to the established banks on cost or customer service. “Ethical” was quite a useful marketing tool for the Co-op Bank, but there were other investment houses that also operated an ethical investment policy, and being ethical does not necessarily demand a mutual or co-operative ownership structure “empowering” members. Indeed, one of the stand-out features of the Co-op Bank was that its customers were not automatically members of any co-operative society, and remained depositors, and thus had no vote to sway decisions made through the Co-operative Group’s arcane and frankly undemocratic structures.

Through breathtaking mismanagement, the Co-op Bank managed to turn a weak position into a terminal one through its almost casual acquisition of the busted Britannia Building Society. Saddled with toxic debt, the Co-op Bank’s losses were beyond even the means of the wider Co-op Group to fund, and so it found itself 70 per cent owned by American hedge funds, about as far away from the ideals of the Rochdale pioneers as it is possible to reach.

Even now, the future of the Co-op Bank is threatened, not least by the reputational damage it is suffering. There may be private-sector investors willing to pour more capital into it; if not, then the outlook is bleak indeed, and it may end up as the first sizeable financial institution to be wound down under the Bank of England’s new “living will” regulatory regime. A sad end.