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After near-collapse, the Co-op Bank faces an uphill struggle to rebuild both its financial credibility and its reputation as a leader in ethical business
The UK’s Co-operative Bank is still in a tight spot. The fallout from the 2013 near-collapse of the bank – through poor leadership and unwise investment decisions that led to a £1.5bn bailout, which handed 70% of the bank’s shares to hedge funds – has continued to hit the bank’s performance and its reputation.
A further £400m of fundraising has meant the Co-operative Group’s holding in the bank has shrunk to just 20%. Fighting back, the bank has appointed Laura Carstensen as the new chair of its values and ethics committee. Carstensen is a member of the UK’s Equality and Human Rights Commission, and will sit on the bank’s board as a non-executive director. She was previously a partner at London law firm Slaughter & May, and deputy chair of the Competition Commission.
The bank is also polling its 4.5 million customers on its ethical practices, including the sectors in which the bank should not invest. This is not the first time such a review has been undertaken. The bank’s ethical policy was created in 1992 and has been reviewed four times since “to make sure it remains relevant and in line with our customers’ views”, the bank says.
Speaking to Ethical Corporation, Carstensen says: “Values and ethics are a part of who we are, they make us different as a bank. So a key part of fixing the bank was to make sure they remain at our heart.” Carstensen’s committee will monitor the application of the values and ethics principles, which are part of the bank’s constitution, to areas of business activity and report on them to the bank’s board.
Independent responsible investment adviser Rory Sullivan argues that a strong ethical basis for the bank’s activity is essential for it to retain its distinctive brand identity. “Given that its ethical stance is a core reason for many customers to bank with it, there is a clear commercial rationale for the Co-operative Bank to retain its ethical commitments,” he says.
“Any losses in terms of business foregone would be far outweighed by the benefits in terms of customer retention and the ability of the bank to win new business.”
Ethics begins at home
The bank’s existing ethical policy focuses on areas such as the promotion and protection of human rights, supporting economic and social development, and the protection of the environment and animal welfare. The customer poll asks for views on extending the ethical policy to include operating with honesty and transparency, promoting responsible banking and treating customers fairly.
“The results of the poll will help us focus our ethical activity in a way that reflects what’s important to our customers,” Carstensen says. The poll will also help the bank translate its ethical policy into relevant products and services. Sullivan says the bank needs to remember its roots. “The Co-op Bank’s owners need to recognise that the bank’s ethical policies were central to its ability to attract and retain customers. But these need to be married to a professional business approach. The bank faces two challenges: demonstrate its commitment to ethical principles and demonstrate an ability to manage its core business effectively.”Co-op Ethical banking ethical brand identity stakeholder poll