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Co-op stops offering new business funding

Category: Scotland Finance News — Paul Morgan on June 2, 2013

The Co-operative Bank has made the decision to no longer offer finance to its new commercial customers, as concerns mount over its position.

The news comes just a few weeks after Moody’s, one of the big three ratings agencies, downgraded the bank’s debt rating to ‘junk’ status. The agency went on to say it could require state intervention to save the bank.

A statement released by the Co-op explained:

“We would not, at this time, look to grow our corporate lending business by lending to new corporate customers.”

The statement went on to say that in March, a decision was taken to continue to support existing business customers.

Along with a number of other banks, the Co-op is presently in ongoing discussions with regulator Prudential Regulation Authority (PRA) about how much cash it needs to hold in reserve.

Industry experts have said the announcement from the bank shows that there are significant capital problems. One analyst had suggested it could lead to a break-up of the group, which includes funeral services and supermarkets.

Many firms in the UK, including those in Scotland, have been actively moving away from traditional commercial finance facilities. Many of these have moved to alternative facilities, such as invoice discounting and factoring instead.

It could certainly be a body blow to the bank, with corporate lending making up around 25% of the Co-op’s loan book.

With the group finance director and the bank’s chief information officer confirmed as leaving the group recently, it seems that there are still rough waters ahead.

'Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

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