Will Co-Op pull out of banking?

Lloyds branch facia Lloyds should not suffer too much from the Co-op's pull out from the deal - others may be

For Lloyds, the Co-Op's decision not to buy 631 branches with £25bn of deposits from it should not be too damaging.

The European Commission is forcing Lloyds to dispose of this operation, which is being rebranded as TSB, to promote competition, and that will still happen - by floating the separated business on the stock market.

But for the Co-Op and the banking market, the ramifications are much more serious.

The Co-Op's board yesterday decided that the new regulatory burdens being placed on banks and the weakness of the economy makes banking a much less attractive business.

It will now review its existing banking operations, under a new chief executive who arrives on 1 May, and I am told that it could decide to withdraw from banking completely.

That would be a huge blow to the Treasury and Bank of England, which had hoped that the Co-Op would become a powerful competitor to the big banks.


To be clear, the Co-op isn't going to withdraw from banking tomorrow, so there is no reason for Co-op depositors to feel they are going to be left high and dry.

The outgoing chief executive, Peter Marks, says the Co-op will develop its banking operation over the long term.

But I understand there is a possibility it will get out of the business in an orderly way, after the new chief executive, Euan Sutherland, has had a chance to review it.

And here is one important reason why the non-bankers on the Co-op's board are nervous about getting bigger in banking: they are acutely aware of how the non-bankers at HBOS, Sir James Crosby, Andy Hornby and Lord Stevenson, were pilloried by MPs earlier this month for making a total horlicks of their bank.

Most important, however, is how the Co-op's withdrawal from the Lloyds deal highlights the tension between the government's twin ambitions - of making banks safer through increased and improved regulation and promoting competition.

The Co-op apparently took the view that it could not adequately cover the costs of the increased regulatory burden on banks, even when enlarged by the Lloyds deal, in the UK's worsened economic climate.

And here is perhaps the most telling fact. The Co-op was buying a bank from Lloyds that is far better capitalised than its existing bank, so it would actually have been strengthened, in a prudential sense, by buying the 631 TSB branches and £25bn of deposits.

But even with that huge incentive, it could not persuade itself that pressing on with the acquisition made commercial sense (and this from a co-operative, whose profit motive is less acute than most PLCs).

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 471.

    469 AFA

    I conclude that you are equating terror rather than terrorism with that deep seated fear which one would have when faced with that untrammelled naked greed in the state of nature and which seems all too similar to that greed which is the driving force in modern finance.
    I guess the modern iteration is an evidence of Darwinism.

  • rate this

    Comment number 470.


    Terrorism is a word with terrible connotations but poor definition.


    You are not the only one searching for meaning. In truth you need to judge for yourself. Feel free to disagree with anyone: it is a moral, personal thing.

  • rate this

    Comment number 469.

    sw @468
    "searching for meaning"
    As also the Co-operative?

    Point made by omega@464, labels & perspective: "We follow orders, they allow themselves to be brain-washed", and vice-versa, perhaps. Most at root in fearful aggressive greed, emulation & revenge, aspects of pre-democratic ignorance

    "Terror" (and criminality) possible in Heaven, rare not 'mundane', a non-contagious mental health issue

  • rate this

    Comment number 468.

    467 afa

    You use the word "terrorism" and then seem to define it as "merely criminal" and as a relative term. This seems to me to be disingenuous as you use a word which has extreme connotations and then equate it with something more mundane. One is left searching for meaning.

  • rate this

    Comment number 467.

    omega @464
    Staying on-topic & 400ch will challenge
    Hope clues enough

    Posted before on 'basic faith' (in existence & caring)
    Likely to make 'survival of fittest' a (maybe 'intended') +ve inspiration

    Pressing on, + / - Co-op, high-street banking 'terrorism' reflects inequality (all 'perspectives' on). In equal partnership, any 'terror' merely criminal, or 'for the tiger' (animal rights over human)

  • rate this

    Comment number 466.

    Apologies if it's been said earlier; the complexity arises from the failure of the high street banks to consolidate their systems post merger. They have several product processing applications that they then have to try and serve via one channel solution. Be VERY interesting to see how "splitting" a TSB out of Lloyds works..that might be the root of COOP's fears.

  • rate this

    Comment number 465.


    We could both knock that up in a spreadsheet. And with a few forms, we could input a transaction, log it and alter balances. We could set a timer, or change currencies as we go, etc.

    I don't advise it though. I hear spreadsheet usage is prone to error!

    Commercial databases and transaction management software can be bought off the shelf. I'm sure banking is complex, but not uniquely so.

  • rate this

    Comment number 464.

    458 - All for All.
    Well yes, there are two definitions of terrorism depending on which side, or which perspective one has. "Survival of the fittest". For good? Yes & no. Depends on the arena in which one applies it really. My friend, I am a writer & I know for sure that you have much constructive comment, but as I have posted before, please try to be a little more easier on the reader.

  • rate this

    Comment number 463.



    You need, for every transaction over a current account, at least most of the below
    Input date
    Value date
    Unique transaction ID
    Source system
    Source system reference number
    Customer reference
    Account number
    Counterparty reference number
    Counterparty IBAN, Sort code etc
    Settlement instructions

    Transaction type

  • rate this

    Comment number 462.


    Not for a bank. With banks. And nothing to do with banking per se. Apologies for any misleading comments. I do not presume to know your business. I know IT.

  • rate this

    Comment number 461.


    Debit from one account and add to another.

    I thought that you worked for a bank.
    You need sheds load more than simple dr/cr.

  • rate this

    Comment number 460.


    Debit from one account and add to another. Sometimes internally (great!), sometimes through a secure connection (still straightforward, as this anonymous conversation proves).

    All were achieved long before computers. What has changed is scale (quantity of transactions).

    Any increase in complexity comes from elsewhere.

  • rate this

    Comment number 459.

    Robert, why would the Co-op pay a lot of money for an old shabby business with a dubious customer list?
    Running a little bank prudently and growing organically is still a licence to print money. The Co-op have a nice little business well presented and with good staff.
    I support their Boards decision and maybe the exit from banking sour grapes idea is coming from City fee earners!?

  • rate this

    Comment number 458.

    "define or be defined"
    Thomas Szasz
    Risk of competitive insanity
    Survival of fittest, not at all necessarily 'worst'

    But is there a 'people's definition' of 'terrorism', as of 'democracy'?

    The former: 'extremity in attempted rule of an Unequal People'. Latter, of course: 'rule Of, For, By, the Equal People'

    Exit 'private advantage', no question: banking like water, gas, trains, etc

  • rate this

    Comment number 457.


    Or to put it another way, if retail is seperated out, the retail side doesn't need to deal with the disparate systems.

    It has to deal with
    1. Loans
    2. Time deposits
    3. FX
    4. Trade finance
    5. Collateral
    6. GL postings
    7. Securities transactions
    8. SO and DD
    9. Mortgages
    10 Credit cards
    11 Guarantees

  • rate this

    Comment number 456.

    Without customers Lloyds sites are worthless; without investment many look shabby.
    Talking to a friend (Lloyds account pre-TSB) she received no letter and branch staff insisted she would move forward with new TSB. After seething she rang and said unless she was retained at Lloyds she would leave.
    Perhaps staff are on bonus to keep customers; maybe now Lloyds will bonus customers to stay.

  • rate this

    Comment number 455.

    The 1 or 2 years it takes for these type of deal to go through in effect gives a free / low cost option to the buyer.

    They agree terms and then just before execution they see if the economic climate etc has improved to justify the price and decide whether to go ahead. Not the first time this has happened and won't be the last.

  • rate this

    Comment number 454.

    451 "BoE can't do it all"

    I wasn't suggesting that, you clearly have knowledge of the present structure both technical & banking wise.
    What I was suggesting, you take BoE structure as a template for a digital currency which everyone & every company has to use. Banks then have to attract investment & stand or fall on their competence. A clearer distinction between money & other monetary assets.

  • rate this

    Comment number 453.


    Or to put it another way, if retail is seperated out, the retail side doesn't need to deal with the disparate systems. Reduced complexity, reduced cost.

    The investment banks still needs c/a transaction management, but that's the bit of the business that is profitable so the cost can be borne by the business.

  • rate this

    Comment number 452.


    Scale, auditing capabilities and data integrity add complexity, but otherwise you're just describing an ERP system, accounts package or car management system. Computers are good at this. Cost is clearly not prohibitive. I would suggest business cases muddy the water more than tech reqs.


    One of many solutions, yes. Too radical for the powers that be, but yes.


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