Business

Co-op sale would be 'bad for competition and choice'

Co-Op Bank Branch Image copyright Getty Images

Former business secretary Sir Vince Cable and two Treasury Committee MPs have raised concerns about the planned sale of Co-op Bank.

Sir Vince told BBC 5 live a sale would be "bad news" for all UK bank customers because of reduced competition.

Earlier this week the Co-op Bank's board put it up for sale, four years after a near collapse.

The bank was rescued in a deal that left the Co-operative Group with a 20% stake and hedge funds owning the rest.

Co-op Bank has four million customers and is well known for its ethical standpoint, which its board said made it "a strong franchise with significant potential" to prospective buyers.

But the former business secretary and the two MPs told BBC 5 live's Wake up to Money that they disagree, fearing an impact on choice and competition.

"Whatever we think about the Co-op Bank and how it got in to trouble, it's bad news when we have only a very, very small number of banks catering to domestic and business customers," Sir Vince said.

"Britain is in a very unusual position of having a very high concentration of banks, quite unlike most continental countries such as Germany, quite unlike the United States, where there are lots of big and small banks catering to different needs."

He said: "We have a concentrated system, and it's one that has historically provided a very bad service."

Higher charges

Treasury Committee member George Kerevan, the SNP MP for East Lothian, said he was "extremely concerned".

"My big worry is that one of the big vulture funds will buy it up simply to squeeze out what remaining value there is, and we'll have even less competition with banks on the high street," Mr Kerevan said.

"Britain has probably the most monopolised, concentrated banking system in the world. It means there's no competition, which means that charges to the consumer are higher than they need to be," he added.

Meanwhile, Helen Goodman, Labour MP for Bishop Auckland and who also sits on the Treasury Committee, had particular concern about the sale because "it's the only ethical bank which is available to large numbers of people".

"It seems to me that that's an option that many people wish to have," Mrs Goodman said. "So obviously, if the Co-op Bank has to be sold I hope that whoever buys it can make a firm, legally-binding commitment to continue with this ethical stance."

Earlier this week, Co-op Bank chief executive Liam Coleman said the company's strong brand and "distinct values and ethics" put it in a strong position.

"In a market where there is little to distinguish many banking brands, we believe this continues to set us apart," he said.

The Co-operative Group said in a statement it "supported the plan to find the bank a new home", adding that its "goal is to ensure the continued provision of the type of co-operative banking products our members want".

Listen to this episode of Wake up to Money, which was broadcast on BBC 5 live on 16 February.

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