The co-operative bank. Pic: Co-operative bank
Co-operative Bank, popular with Labour-run authorities and used by Hackney, Tower Hamlets and Lewisham, announced today that it would no longer provide banking services to UK local authorities.
The boroughs along the East London Line must now find other banks to service their transactional banking activities. These contracts manage local residents’ rent and council tax payments to their local authority.
Co-operative Bank said their withdrawal is part of their “plans to simplify and rebuild the bank focussed on serving the needs of individuals and small and medium sized business customers”.
Chris Locke, the Principle Banking Officer for Hackney, explained in a 2011 YouTube video why the borough uses Co-operative Bank.
Locke said the bank was “top of the list” for excelling on two criteria: best value for money and best service.
He added the bank understood the public sector and had the ability to provide tailored services.
Locke praised Co-op’s ethical side, contrasting it to other banks, which have a “monopoly position and a take-it-or-leave-it approach.”
Co-operative Bank’s withdrawal from local authorities has outraged Move your Money, a national campaign group which aims to build a better banking system.
Laura Willoughby, Chief Executive of Move your Money, said: “This is a short-sighted move for Co-op Bank. Councils are an important and profitable market.
Willoughby said local councils will have no choice but to allow what she defined the infamous “big five” banks—Barclays, HSBC, Lloyds, RBS and Santander—to manage their money and take over “lucrative” transactional banking contracts.
Co-op has a 35 per cent market share of transactional banking contracts across all local authorities in the UK.
Willoughby said local authorities would have no choice but to use the big five banks that “lied and are responsible for the financial crisis”.
She continued: “These banks don’t chime with local authorities’ values.”
Co-operative Bank has had to withdraw its services due to a massive £1.5 billion funding gap. Willoughby said the behaviour of the “big five” banks is partly responsible for the gap.
“It’s ironic that these banks can now sweep up tonnes of public cash,” said Willoughby.
Move your Money also said Co-op’s actions clashes with the Government’s “ambition to diversify and regionalise UK banking and promoting competition.”
Willoughby added: “Local Authorities need to be able to choose from a competitive market and find banks that share their values and aspirations. Instead, this announcement leaves their choices virtually non-existent.”
Move your Money wants local authorities to demand “positive change in the financial sector” by using local and ethical banks “that actively support the local economy and invest for social value”.
