The Day the Co-operative Bank Stopped Co-operating.

Once upon a time there was a bank that did not exist to make a profit for its shareholders. Instead, it was owned by its members and shared its profits with them. It did not sell products that its staff didn't really understand and it wasn't concerned with taking over as many other banks as it possibly could to grow its market share. Unspectacular banking - and it was ethical too: it refused to lend to businesses that were involved in the arms trade or in tobacco products, for example. But then it bought a building society. That was also a mutually-owned business (we used to have a lot of those, but most converted to become banks, and turned out to be run by people with about as much idea of banking as I have about football or brain surgery). Unfortunately, the building society, in order to compete with the bad banks that used to be mutually-owned, had made some spectacularly bad lending decisions and they sank the bank that co-operated with its members and its lenders and borrowers. And no amount of hiding behind spurious arguments, such as it was actually a 'plc' all along, just owned by a mutual organisation, will change the fact that ethical considerations and member dividends have now been sacrificed: we just lost another of the few mutuals, and in spite of the need to open up banking and increase competition, that everybody agrees on in principle, we now have one less alternative to choose from.

The end of the Co-operative Bank?

Well, so much for the much vaunted spread of competition in the retail banking sector. The beleagured Co-op, of which I'm a business and personal customer, seems rather shaky this weekend. I like mutuality in banking - sod the shareholders and their clamour for dividends - mutuals inject some sanity into the financial world; and in the case of the Co-operative, this was topped with their ethical stance. But not all mutuals were so nice and cuddly. The Britannia Building Society, for example, might have been owned by its members, but it was driven by a very pushy sales culture that I came to dislike intensely when managing accounts their on behalf of my parents. Every visit turned into a sales opportunity. Once, at the end of a month, I was coerced by the manager of the Huddersfield branch into converting two low interest accounts into 5 year bonds:I had an eye on the parking meter; she on her sales targets while the spiel wore relentlessly on. So important was the transaction to her that she insisted on dropping the forms round to my house in person, it was, she said, a short detour for her on the way home. In consequence of this treatment, I closed all the Britannia accounts as they matured and voted against the 2009 acquisition of the Society by the Co-operative. With pay reportedly being clawed-back from former Co-operative and Britannia employees involved in the debacle, I think there are many in the Bank and amongst its customers who must now wish they'd done the same. Unfortunately, the Co-op isn't too big to fail, and its founding principles are probably way too far to the left for Osborne to feel much in the way of sympathy, so I don't think there will be much appetite for a Treasury-mounted rescue; the only hope from that quarter might be the desire to give some traction to the oft-repeated calls for greater competition in the retail banking sector. Co-operative savers and investors, however, need to keep their options open, and hope that another mutual offers something approaching the same level of service that saw the Co-operative consistently outperform larger high-street operations in the customer satisfaction stakes.