Will the Co-operative bank’s ethics survive a buyout?
04 December 2013
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The Co-operative Bank has been struggling to reassure its customers that the ethical standpoint it built its reputation on will be unchanged, despite losing the majority share in the company to American hedge funds.
This move was done in an attempt to plug the current £1.5bn hole in the Co-operative bank’s finances. Euan Sutherland, the CEO of the Co-operative bank has declared that the bank's rescue has been achieved ‘without the need for a taxpayer bailout.’ But the involvement of US hedge fund company intervention has raised some serious questions among Co-operative bank customers about what ethical direction the bank will take next.
US Hedge Funds
The huge shortfall has been attributed to bad loans and a disastrous merger with Britannia building society in 2009. The new majority owners of the bank hedge funds, led by Silver Point and Aurelius, said on Friday night the bank was "unique for its ethics, mission and heritage which are an essential component of the bank's differentiated approach. It is important to us that the bank maintains its unique characteristics and ethos."
Overdrawn: The bank seems to be have been forced to sacrifice it’s ethos to save itself.
The Co-op stressed this would not stop the fresh injection of the capital reaching the bank by the end-of-year deadline set by the Bank of England.
Customer Reactions To Co-op Buyout
"Is that what the pioneers who formed the Co-op anticipated? That it would be in the hands of American hedge funds?" This was the opinion of the Labour MP John Mann, who happens to be a former Co-operative group boss.
This is the big question for many customers. The bank is known for its ethical policy, which reflects customers' concerns and includes issues such as human rights, the arms trade, genetic modification and animal welfare.
As the bank has now lost majority control, it has been subject to widespread scrutiny and negative predictions for the future. Some former customers have been looking in other directions for the a replacement bank that would fulfill their ethical requirements.
In its lifespan the bank has turned away £1.2bn of business for ethical reasons alone, but now there are concerns as to whether this will be feasible when there are shareholders to please.
With 4.7 million current customers, many of which choosing the Co-operative bank over the top four major banks due to its ethical and moral standpoint, could this sacrifice in ethics spell the end for the Co-operative bank in the future?
I think that the admirable ethical stance that the Co-operative bank has adhered to to this point will struggle to survive the coming years. Initially they may continue to put money into social interests and goals, but now with shareholders involved I fear eventually they will be merely paying lip service to their intended ethos, and will begin to behave in a manner that suits the shareholders, who do, after all, own the majority stake in the company.