The boss of the Co-operative Bank has described the decision by City regulators to waive a £120m fine on the loss-making institution as “a pragmatic solution”. Niall Booker, the chief executive of the bank, said that any financial penalty needed to be weighed against the impact it would have on financial stability.
He said the Financial Conduct Authority had not discussed the size of any potential fine. The FCA publicly censured the bank for misleading investors about its financial strength in 2012 and for failing to provide details of changes to senior management.
The Bank of England said it would have fined the bank £120m but had decided not to because of its financial situation.
The Co-operative Group owned 100% of the bank until two years ago when a £1.5bn capital shortfall was identified. Holders of bonds issued by the Co-op bank rescued it, through a bail-in that left a range of hedge funds with stakes in the bank, which is now just 20% owned by the Co-op group. The alternative could have been a bailout by taxpayers.
Booker said any fine on the bank would have penalised these hedge funds: “We’ve always made the philosophical point ... We haven’t taken any public money and a number of investors bailed in at the time took the risk of failure off the public purse. To ask those people to pay a substantial fine would make the proposition in the future much more risky.”
“This is quite a pragmatic solution,” added Booker.
The bank failed the Bank of England stress tests in December but has a plan in place to bolster its financial position by selling off risky assets.
Booker is leading a new management team at the Co-op and is attempting to reduce losses. Its results in March showed losses for 2015 had narrowed to £264m compared with a £633m loss the year before.
Booker, a former senior executive at HSBC, joined the Co-op bank at the height of the crisis and expects it to take another two to three years to clean the bank up.
