24 Apr 2014

Why Labour isn’t really severing its ties with the Co-op Bank

Interesting story from the BBC that Labour is going to cut its link with the embattled Co-operative Bank.

Forget for a moment that the bank was already reviewing its relations with the party. The apparent move to Unity Trust Bank – the trade union bank – is hardly severing links with the Co-op.

(FILE) Disgraced Co-Op Chairman Paul Flowers At 2010 Downing Street Event

Unity Trust was founded as a joint venture between the Co-op and the trade unions in 1984. It might be intriguing enough if Ed Miliband’s party now had a bank whose president is Unison leader Dave Prentis. (Billy Hayes of the CWU, Paul Noon of Prospect and the RMT’s finance director are also on the board).

Miliband could be seen to have reformed the union funding link only to have turned it into bank loans rather than donations. But that’s not the point.

Unity Trust bank right now is functionally part of the Co-op Bank. The Co-op’s 27 per cent shareholding is one thing. But more important is that the bank’s articles of association demand that Co-op controls Unity Trust.

Regulators  (the Bank of England now) naturally demand that bankers, not union leaders, run banks. Therefore, despite its minority shareholding, the Co-op Bank appoints the majority of the board, the chairman and the MD.

That means the Co-op Bank’s own risk director and financial control director sit on the board of Unity Trust Bank.

Now Co-op did appear to be trying to sell its stake. But this has not happened yet, and as another bank would have to buy the share in order for unity trust to retain its banking licence, I imagine this will be a rather lengthy process.

So right now this is far from a case of Labour severing a link with a bank facing more embarrassing reports, and more akin to changing the part of Co-op to which the party is linked.

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5 reader comments

  1. Jonathan da Silva says:

    Given the last Labour Govt tried to trade prisoners for oil and supported Libya and the US’ torture and rendition programs not to mention starting wars why is the Co-Op still having anything to do with Labour itself? Why is any decent human being?

    Before mentioning PFI and their light City regulation and the string-less bail outs.

    1. Andrew Dundas says:

      Please help us understand your complaint about the last government.

      Which prisoners for oil?
      Support for Libya – in what way?
      What UK support for US rendition?

      As far as Iraq is concerned, the UK’s RAF operated a “no fly zone” over southern Iraq for ten years as a part of the Kuwait peace settlement agreed by the UN, and to protect Iraqi citizens. [the USA covered the Northern NFZ]. Thus military action continued for all of those years prior to 2003.
      The UK also provided experts to the UN’s search for WMDs in Iraq that repeatedly claimed that they needed to carry-on searching for those weapons even after more than ten years of systematic deception by the Iraqi government.
      Numerous UN resolutions were defied by Iraq, thus bringing on the invasion.

  2. Andrew Dundas says:

    If the Co-op bank went bust, the Labour Party would have been one of its unsecured creditors. Key point is that Unity Bank is not responsible for the Co-ops bad debts.

    Sensible policy for all organisations is to withdraw all and any vulnerable funds from loss-making banks and finance houses pdq.

    1. Martin Meteyard says:

      The Labour Party is actually a debtor of the Co-op Bank via its overdraft, not a creditor – therefore no risk from that point of view.

  3. Robert Taggart says:

    DAMMIT – signed, Rightist Co-operator !

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