Eight years of banking pain and still no end in sight

Co-Op bank has put itself up for sale today. Ouch, even after a big bailout from new shareholders, there seems to be no way for it to actually turn a profit on its customer base. Frankly with low interest rates and non-banks piling into the market, there is not much to be said for retail banking. They never did get there way on charging for current accounts...


Add this to RBS, being denounced in the press for being about to launch another mass redundancy round to try and cope with its 9th annual multi-billion loss. Again, similar to Co-Op, it can't make money from its business - certainly only a couple of billion from what it has left after shutting down investment and international banking. This  two billion is dwarfed every year by payouts for the sins of the past misdemeanours.


2007/8 feels like a long time ago, but many of the problems in the banking system are still working through. The medicine of Quantitative Easing, which was hard to argue against at the time, has persisted long past its use by date. The Bank of England has always found a reason to keep the taps on to help the economy.


However, the underlying system is now very screwed by this approach. With no interest rate differential in the markets, banks struggle to make money. The regulatory burden, necessarily increased after the great crash, is expensive. Instead of the Banks making good, new entrants, with lower costs have come to the market and started to feast. This is good capitalism and as it should be, but will make for a big taxpayer write-off on the RBS investment.


Perhaps we should just do it and move on, rather like Co-Op group did with Co-Op bank.

The Co-Op saga deepens; what is wrong with mutuals?

Ursula Lidbitter

Here is the latest statement from the Co-Op as Len Wardle has resigned as Chairman:

"The recent revelations about the behaviour of Paul Flowers, the former Chair of The Co-operative Bank, have raised a number of serious questions for both the Bank and the Group. I led the Board that appointed Paul Flowers to lead the Bank Board and under those circumstances I feel that it is right that I step down now, ahead of my planned retirement in May next year. "I have already made it clear that I believe the time is right for real change in our operations and our governance and the Board recently started a detailed review of our democracy. I hope that the Group now takes the chance to put in place a new democratic structure so we can modernise in the interests of all our members."

He is to be replaced by Ursula Lidbitter, who has climbed the corporate pile after a long career at the Co Op. She is to lead a root and branch reform of management. Of course, being a co-operative is a bit like being a Union. Non Members need not apply. So how far the reform will really go who knows, but good luck to her.

What though of our Westminster Politicians. They were lining up to praise the likes of Co-Op and the John Lewis partnership just a few years ago. David Cameron had them as the drivers of an inclusive Big Society. Ed Balls had them down as the acceptable face of Capitalism. Problem is that nearly all the mutual building societies have gone under since the Financial crisis or are now stuck offering very uncompetitive products as their cost of capital is now so high. The Co-Op, long a bed-fellow and huge supporter of the Labour Party has come very unstuck too in the Banking game. Those of us old enough to remember will recall the Banking Partnerships of the 80's have long since disappeared. There is precious little evidence that mutuals or partnerships are fairer or better than normal companies. All companies risk appointing coke heads and ego maniacs to the top job if they fail the basic tasks of finding the right, experienced candidates. Once you have a demonic leader, as the Country found with Gordon Brown, the road to ruin is true and straight.

So what now can the politicians who seek an alternative to Limited and Public companies do - the options are more limited with a return to State sector or perhaps a hope that State Owned Enterprises of other Countries, like the Chinese ones invited to build our new nuclear power station, maybe the answer....