The Co-operative Bank has postponed a vote on a new bonus plan for its chief executive, Niall Booker, just days after he warned the bank was likely to fail the Bank of England’s assessment of its financial strength.
The bank is now looking at alternative ways to hand bonuses to Booker and other members of the executive team, after deciding not to put the long-term incentive plan (LTIP) to a shareholder vote next Wednesday.
The decision appears to be related to the admission by Booker earlier this week that it would “come as no surprise” if the bank failed the stress tests being conducted across the banking sector.
The results of the tests – which assess lenders’ abilities to withstand a 35% fall in house prices and rising unemployment and interest rates – are due on 16 December. The Co-op Bank said on Thursday that it did not know the result of the test but was cancelling the meeting scheduled for next week because it “is considering whether modifications to the timing and strategies for the run-down of non-core assets, which are particularly exposed to stress, would be appropriate”.
It has £6bn of former Britannia building society mortgages, which are largely sub-prime and self-certification, in a portfolio known as Optimum.
The bank said the meeting – called for 10 December to approve the new bonus plan, details of which have not been released – had been delayed because the LTIP “includes measures which may no longer be appropriate”.
Booker, who joined the bank in June 2013 when it faced a £1.5bn capital shortfall, receives a £1.2m salary and £140,000 a month, paid in quarterly instalments, provided the bank meets its minimum capital requirements. It is thought he is meeting the terms to receive those payments. A former HSBC banker, he received £1.7m for 2013.
He also had £1.2m in an LTIP granted to him when the bank was still owned by the Co-operative Group of supermarkets and funeral homes and linked to “recapitalisation of the Bank, cost savings and other business-critical issues”. Two-thirds of this was to be transferred to the new Co-op Bank LTIP once it was implemented.
The bank is now owned by hedge funds that participated in its bailout last year, with the Co-op Group owning 20%. Plans for a stock market flotation have been postponed.
The bank said its remuneration committee was “considering appropriate alternatives to the 2014 LTIP and how any outstanding obligations may be met”. A new LTIP for 2015 would be put to a vote at its annual meeting in 2015, the bank said.
