Blowin' In the Wind: Deep Trouble at t' Co-op Bank

The Co-op's Four Leaf Clover Logo

The Co-op Bank has been in deep trouble for a while now, dogged by scandal and failing to make a profit, but this spring it announced record losses of over £2.5 billion and it is now in real danger of going bust.  The bank is part of the Co-operative Group, which spans supermarkets, funeral services, insurance, travel agencies, pharmacies, and farms. This puts the tin lid on another disastrous year for the group, with notable bad publicity including the Paul Flowers ‘Crystal Methodist’ drug scandal, a £1.5 billion bail-out, and disastrous take-overs of the Britannia Building Society and the Somerfield supermarket chain.

The Co-op used to be known as a quintessentially ethical bank: back in 2008 when the rest of the financial sector was in meltdown, the Co-op was riding high.  Western capitalism was in trouble and the Co-op Bank offered a decent and principled alternative.  It self-consciously tried to cash in on the backlash of anger against fat-cat bankers with a high profile marketing campaign voiced by actor John Hannah, of ‘Four Weddings and a Funeral’ fame. Their TV advertisement of 2009 featured a boy blowing dandelion seeds into the air to be wafted on the breeze from the iconic Angel of the North across a Newcastle United football match, a busy shopping street, a fruit farm, a wind farm and a polar expedition, to pickers on a coffee plantation, all to the tune of the Bob Dylan song Blowin’ in the Wind, and winding up with the slogan “Good for Everyone”.

Its moral credentials were of course already well known and long-established. The Co-operative movement originated in a mill town in working-class Victorian Northern England.  The first Co-op store was set up in Toad Lane Rochdale, Lancashire, in 1844. The aim of the Rochdale Pioneers, as the Co-op’s founding fathers were known, was to combat the unfair and exploitative practices of shopkeepers who had virtually cornered the grocery market and were taking unfair advantage of hard-pressed factory workers, forcing them to buy food at extortionate prices.  As well as selling basic foodstuffs at a fair price, the Pioneers established the principle of the Co-op Dividend, a method for sharing the profits with its customers and members. 

Seal of the Co-operative Wholesale Society

From this modest beginning in the North of England, the Co-operative movement thrived and spread, and soon had more than 1000 branches.  The Co-op was always far more than just a retailer, however, and spawned its own political movement, known as the Co-operative Party.  This has long been affiliated with the Labour Party, sharing its aims and core values and sometimes fighting local elections on a joint ticket, notably the ‘The Feelings Mutual’ campaign of 2009.  In recent years support for Labour by the Co-op has also extended to about £18 million in low-interest loans, and a £50,000 donation. Now, in the light of the adverse publicity and increasing aura of scandal surrounding the Co-op, the Labour Party is at pains to distance itself from the troubled retail group, starting with moving its loans to another bank.

To wrap this posting up, I don’t think I can do better than quote my own words from a couple of months ago, in It's A Wonderful Life! Or at Least it Could Be..., so here it is again.

Before this scandal blew up, I would have said that if ever there was a bank with the ideal public image for blazing a trail for ethical banking, setting high standards and implementing reforms, that was the Co-op. Now even that squeaky-clean reputation has been tarnished.  Where do we go now to find a bank with high standards and decent moral principles?

If ever the time was ripe for banks to work hard to regain the confidence of their customers and the respect of the media, it is now.  How could they achieve that? How about knuckling down and getting ready for Basel III ahead of schedule, for example?  By accepting the need for change, embracing Basel III, Volcker and the Vickers Report and implementing the new reforms early, banks could not only restore consumer confidence, but also equip their managers with vital tools for risk management, data control and and improved management reporting to enable them to work more efficiently. Let's do it! Let's be more like George Bailey and less like Mr Potter. Let's save the banks.

.