The chairman steps down from Co-op Bank as they issue £400 million in shares.

The Co-operative Group’s share of their troubled Co-op banking arm is set to reduce to just 20% after the bank has announced it will be issuing £400 million in shares to fund redress for a wide range of products including mis-sold Payment Protection Insurance(PPI).

The bank also announced that their chairman, Richard Pym, will be stepping down at the end of the year and that ‘The board will undertake a full and rigorous process to find a replacement.’

A former chairman of the bank, Rev Paul Flowers, stepped down last year after a £1.5 billion ‘black hole’ was found in the balance sheet. Following the discovery of the ‘black hole’ in December, the bank had to be rescued by a consortium of shareholders, led by American hedge funds.

Following this, three months later, an announcement came that it needed to raise a further £400 million in capital to pay redress for mis-sold Payment Protection Insurance (PPI) and interest swaps, plus widespread mortgage failings.

Niall Booker, Chief Executive says the bank’s five largest shareholders have backed the move, which will see the Co-operative Group’s share reduced to 20%. Four major shareholders have already committed to buying 31% of the new share issue. Mr Brooker commented: “If successful, the additional capital to be raised through this transaction will enable us to reset our starting capital position for the execution of our business plan to return to our roots as a bank focused on our retail and customers, with values and ethics at the heart of our business.”

Following a nine month review of the bank’s operations by an independent group said “The Co-operative Bank executive management failed to exercise sufficiently prudent and effective management of capital and risk. The banking group board failed in its oversight of the executive. The group board failed in its duty as a shareholder to provide effective stewardship of an important member asset. Collectively, they let down the group’s members.”

 

Posted on Thu 15 May 2014