The FT has published the following grossly misleading story this morning:
The Co-operative Group has been forced to abandon its mutual ownership structure 170 years after it was launched by an idealistic group of Rochdale traders, handing a majority share of its banking business to US hedge funds and other creditors.
The mutual's stake in the bank will reduce to 30 per cent as part of a last-ditch deal with bondholders to bridge a £1.5bn capital shortfall and save the lender from a taxpayer bailout.
This is misleading because it is simply untrue. The Co-op has not abandoned its mutual structure. What it has done is sell 70% of its stake in the Co-op Bank as part of the rescue deal for that bank.
But there is more than that fact to this tale. Because the Co-op never was a mutual bank. It was a commercial bank owned by a mutual, which is not quite the same thing. So it was not, for example, like a building society which was genuinely owned by its members.
What the debacle (and it is a debacle) shows is three things. The first is that seeking to force a commercial model into a co-op does not work. The Britannia Building Society take-over by the Co-op Bank was the main cause of its failing and represented conflicted thinking as much as an outright commercial disaster.
Second, the new owners need to beware; a lot of people are at the Co-op because they want it to be a Co-operative bank. We'll leave if it drops its ethics (the we is deliberate there: I am one who will do so).
Third, there is a need for a first rate mutual and the Nationwide is not it.
For many people the banking crisis is a long way from being solved.
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But where to go to find an ethical bank? I moved to the Co-op because it had an ethical reputation. I couldn’t find many alternatives.
Triodos?
Who?
Triodos was founded by anthroposophists which puts me off for a start http://www.quackometer.net/blog/2012/07/the-bank-that-likes-to-say-quack.html
Steiner-the founder of Anthroposophy had some interesting ideas about economics and is worth reading! See: http://www.goetheanum.org/Rudolf-Steiner-Associative-Economics.4437.0.html
I’m with the Co-Op at present but am now aware that they have not maintained ethics that distinguish them from the corrupt values of the finance world. What on earth are they doing dealing with ‘debt restructuring’ (great euphemism) hedge funds? What’s left? My local credit union has barely got off the ground and is hard-pushed to survive.
They’re not perfect, but they do at least have some ethics (http://www.goodwithmoney.co.uk/ethical-banking/) – or am I being taken in by the spin?
Richard: “We’ll leave if it drops its ethics” – and I’ll be right there with you! I’d suggest starting a petition but I suspect the new owners will realise that it makes sound business sense to keep the ethical policies. Or will they realise that it makes sound business sense to PRETEND to keep the ethical policies?
Well if the hedge funds are in there ‘debt restructuring’ then the ethics has already gone out of the window. I thought they were able to cover their debts from their retail arm – or at least that is what they said at first.
Coventry Building Society offer a limited number of current accounts and are known for their ethical investment policy (although they use HSBC for clearing). However, you need at least £1000 coming in each month to open one.
Richard, I think it is good that you have explained the structure of the Co-operative Bank here because I suspect many people do not realise this. It will be interesting to see how the new 70% ownership affects its future direction.
Like you, I also have tried to find the best bank for my personal affairs and in the end I transferred from Lloyds, who let me down, to Nationwide whose on-line banking is free and straightforward to operate.
There is much in favour of mutual operation but I was also let down by Equitable Life so this is not necessarily the answer either.
We certainly need a new bank in the UK, operating for the benefit of its customers and this could be state-owned, private or mutual – it all would depend upon its business principles and source of set-up capital.
Others have mentioned above the issues with Triodos and from my experience it is best avoided. Its history is carefully concealed. Think of Gove and Steiner schools.
Please explain why the Nationwide is not a first-rate mutual
The concern many have about Nationwide’s policies, on remuneration and other issues, are I think well known
It seemed to me that the Co-op banks’ problems were largely self-inflicted by biting off more than it could chew with the buyup of Brittania.
It seems even ethical banks are putting profit first!
Too true
You have to walk the talk
Ecology Building Society for savings. But NB they don’t do a current account.