Co-op Bank loses customers after ex-chairman scandal

Thu Nov 28, 2013 1:17pm EST
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By Steve Slater

LONDON (Reuters) - Britain's Co-operative Bank CPBB_p.L said it has lost current account customers as a result of a scandal involving its former chairman and a scheme that makes it easier for people to switch bank accounts.

The bank, which acknowledged the damage to its reputation, said its retail deposits and liquidity remained stable and it was too early to identify any significant trends.

British police last week arrested the former Co-op Bank chairman Paul Flowers as part of an investigation into the supply of illegal drugs.

Finance minister George Osborne has ordered an inquiry into the bank, just as its mutually owned parent attempts to push through a rescue plan that passes control of the lender to a group of hedge funds.

Co-op Bank said its recent troubles, competition from other banks and the introduction of seven-day account switching may have contributed "to an increase the bank has seen in the switching out of current accounts."

Investigations are likely to mean the bank will incur more costs than expected as it is subjected to more scrutiny from regulators and takes up management time, the bank said.

The update was included in a statement that detailed technical changes to the deal that will see bondholders take a 70 percent stake in the bank and the Co-operative Group CWSGR.UL keep 30 percent.

It also emerged that Aurelius Capital Management, one of the two biggest hedge funds involved in the restructuring of the bank, has sold its investment.   Continued...

Pedestrians walk past a branch of the Co-operative Bank in central London, November 4, 2013. REUTERS/Andrew Winning