The Co-operative Bank has announced that it has allocated a further £49 million to cover conduct and mis-selling issues. The sum is to cover compensation payments for mis-sold packaged bank accounts (PBAs), for mis-calculated mortgage interest payments and for interest refunds on unsecured loans that did not comply with the Consumer Credit Act. A specific sum of £16.8 million has been allocated for PBA compensation.
Co-operative Bank’s provision for mis-sold payment protection insurance (PPI) stands at £347 million.
So it can be seen that the so-called ‘ethical bank’ has not been immune from mis-treating its customers in the past.
Nor does it seem especially keen to pay redress where it is due. The latest figures from independent complaints adjudicator the Financial Ombudsman Service (FOS) for the first six months of 2015 show that 57% of all complaints it received about the bank were upheld, and 76% of the PPI complaints were resolved in the customer’s favour. The FOS only gets involved once the firm has issued its response to the complaint, so this means that the bank is unfairly rejecting a large proportion of its complaints. The Co-operative was also fined £113.3 million in 2013 for delays in paying PPI compensation.
The bank has announced a pre-tax loss of £204.2 million for the first half of 2015, up from a loss of £77 million for the equivalent period in 2014. It does not now expect to make a profit until 2017, and has shelved plans for a stock market listing as a result. Instead, the possibility of a merger with another challenger bank has been mooted.
Chief executive Niall Booker said:
“Of course, we have always said that addressing legacy issues will continue to dominate financial performance for some time and there is considerable work ahead towards a full recovery.”
Co-operative Bank was bailed out in 2013 as a result of losses on commercial real estate lending, since when 80% of the bank has been owned by bondholders and hedge funds. The long-time owner, Co-operative Group, now only holds a 20% stake.
Earlier in August 2014, the regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), publicly censured the bank for breaching listing rules, and for failing to be open in their dealings with the FCA. The FCA/PRA reported that the Co-operative made misleading statements regarding its capital resources; failed to notify it of two new senior appointments and the reasons for the change in personnel; and had a flawed risk management model. Regarding the senior staff changes, in one instance the FCA was not informed of the appointment until after the individual had left the bank.
Had it not been for the bank’s financial difficulties, it would have received ‘a substantial financial penalty.’
The FCA says it is continuing to investigate the conduct of senior officials at the bank.
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