Co-op Bank Boss Quits After Moody's Downgrade

(18 Posts)
MoreBeta Sat 11-May-13 20:15:43

ElenorRigby - yes the Britannia problems are in commercial property and as a friend of mine says who organises multi million pound commercial property mortgages there is a 50% drop in commercial property prices in the North and Midlands. I do not know the situation Britanna is facing but in general the banks absolutely cannot afford to take the hit on bad commercial property loans.

I heard that the these bad commercial property loans are being stacked up in special off balance sheet property vehicles all over the banking system.

What happens is the bad loan is rolled over but the interest rate is set very low so the interest on the new loan can still be paid by the rental income so that it suddenly is transformed into a 'good loan' even though the original loan defaulted and the property is worth far less than the capital value of owed.

Kicking the can will only go on so long.

niceguy2 Sat 11-May-13 11:27:17

I find it quite ironic that in the clamour to make the banks 'pay' for what they've done and ensure history doesn't repeat itself that the new rules seem to be causing huge problems for a bank whose staked it's reputation on it's ethical credentials and has no casino style investment arm.

ariadneoliver Sat 11-May-13 09:51:22

Here's an old article covering links to Labour www.telegraph.co.uk/finance/2935222/Labours-mutual-friends.html

noddyholder Sat 11-May-13 09:51:15

The whole sham is built on forebearance. It has to topple eventually although I suspect the new govt buy a home schemes will keep hints afloat a bit longer ad then bang

blondieminx Sat 11-May-13 09:48:04

I suspect that govt have strongly encouraged the forbearance in the hope that the economy (and property values) will pick up a bit soon, Elenor - if there was more of a crystallisation/correction then the economy would become shocked and slide further. Thus playing further into the hands of the right wing nasties <shudder>

ElenorRigby Sat 11-May-13 09:43:12

Well Blondie they kicked the can at least 5 years down the road wink
How long can they keep the plates spinning I wonder.

blondieminx Sat 11-May-13 09:39:12

More x posts - slow typing on phone!

blondieminx Sat 11-May-13 09:37:42

Exactly MoreBeta - a lot of the property deals have been "restructured" which often just means kicking the can down the road a bit hmm there hasn't yet been the sort of shakedown here that they're having in Ireland where there's now a "bad bank" and lots of litigation over various collapsed property empires.

ElenorRigby Sat 11-May-13 09:36:39

Banks are sitting on a lot of bad debt. But low interest rates, government schemes and bank forbearance (extending loans, mortgage holidays, switching from repayment to interest only) have prevented the loses being crystallised.
I had read that commercial property prices had really fallen (sorry cant find link atm) and apparently the Coop's commercial property portfolio have been badly hit.

ItsAllGoingToBeFine Sat 11-May-13 09:35:08

Isn't the Coop much much smaller than other banks, therefore less impressive losses to be made?

Something on the news yesterday said that nothing to worry about,coop group would bail the banking section out before the government needed too.

I'm not at all worried,I bank with the coop, and will be opening a new account with for DD next week.

blondieminx Sat 11-May-13 09:32:01

X-post with MoreBeta.

Interesting about the labour party thing. Wonder if, were a bailout needed down the line, Osborne & co would refuse it until Labour had paid up thus leaving them skint as we head towards the General Election in 2015.

MoreBeta Sat 11-May-13 09:29:30

It does make me wonder how well the other banks are really doing if the Co-op is having difficulties. They all have the same exposures to property loans that have gone sour..

ElenorRigby Sat 11-May-13 09:27:37

I was pretty shocked to hear about this I thought it would be headline news but no.
Maybe your right it doesn't fit with the narrative.

blondieminx Sat 11-May-13 09:26:55

I found that story very odd, it was in CityAM yesterday. I bank with the co-op.

Co-op walked away from buying the 600 branches Lloyds have to sell after receiving a govt bailout. That indicates that they are careful about the deals they do.

They brought up a loan book (Britannia? Not sure) which isn't doing very well but what bank doesn't have an NPL (non-performing loan) book these days.

They also said that under the new capital adequacy rules they will need to raise more funds but as they are part of a larger group I'm not overly worried just yet.

MSE have produced this guide about the 85k savings guarantee

MoreBeta Sat 11-May-13 09:26:23

This was the bank that was only 6 month sgo discussing buying Lloyds bank branches.

The Co-Op bank group includes the old Britannia Building Society and the Giuardian is reporting it is that takeover during teh financial crisis that ahs now caused much of the problems with bad loans.

The Co-op has had a long association with the Labour movement and Unions and is typically the bank many public sector workers get their wages into.

The Labour Party owes the Co-op bank several millions.

ariadneoliver Sat 11-May-13 09:21:28

Maybe it's the whole mutually owned green ethical thing which doesn't fit the narrative, so it's difficult to report on? Apparently the Labour party owes it £4 million so the request for repayment of that may generate some news interest.

ElenorRigby Sat 11-May-13 09:16:44

Strange how this news is getting scant coverage in the main stream media.
Basically the Co op Bank has been downgraded to junk status and barely a whisper about it!?! hmm
News buried to prevent panic...

ariadneoliver Fri 10-May-13 11:10:08

news.sky.com/story/1089124/co-op-bank-boss-quits-after-moodys-downgrade

Let's hope this doesn't get too expensive for taxpayers.

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