Co-op Bank has been criticised by UK consumers in a FairBanking Foundation survey for the products and services it offers, adding to its troubles as its ex-chairman, Paul Flowers, is arrested for questioning by UK police over allegations of buying drugs.
A study conducted by the FairBanking Foundation discovered that the Co-op Bank failed to score 'one star' for its savings accounts, current accounts, personal loans or credit cards, despite its marketing stance as an "ethical organisation" on the side of the consumer. Lack of IT funds for front-end customer service platforms no doubt contributed to its poor score as the bank struggled to survive in recent years and to integrate the technology platforms of the Britannia building society, which it took over in 2009 incurring bad debts.
The news of customer dissatisfaction is the latest in a long line of bad news for the Co-op Bank. It is also facing a public inquiry into its near collapse this summer and the appointment of methodist minister, Reverend Paul Flowers, as chairman. Flowers voluntarily resigned in June after the board approached him about allegedly excessive expense claims and he was subsequently filmed in November 2013 buying cocaine for £300 by the 'Daily Mail' newspaper, leading to today's arrest by UK police.
Questions about Flowers, who had no banking qualifications or experience, had previously been raised years earlier when he twice insisted to a Parlimentary Select Committee in the UK that his banks' assets were £3bn when they were really £47bn at that time, demonstrating he was perhaps not 'fit for purpose'. The bank's capital base did subsequently worsen as bad debts from its Britannia building scoiety takeover and failed 'Project Verde' attempt to takeover 632 Lloyds Banking Group branches caught up with it, necessitating a rescue from hedge funds and the abandonment of the Co-op Bank's mutual ownership structure. The reborn TSB bank brand was eventually revived by Lloyds Bank to set up the 632 branches as a new standalone UK retail bank, complying with the government's demand for more competition in the sector.
News Analysis: Co-Bank Faces A Long Road to Recovery
The chief executive of the ailing Co-op Bank admitted recently that it is unlikely to make a profit for up to five years and will have to shut 50 branches as part of a rescue package and IT overhaul bankrolled by the bank’s new hedge fund owners.
Anthony Elliott, the chief executive of the FairBanking Foundation, whoose survey unsurpringingly found consumers to be unhappy with the service at the rudderless bank, said he was shocked to see others in his Foundation's report that were scoring worse than the Co-op Bank. "There are others who've have scored nothing," he said. Reputationally, the Co-op and UK retail banks generally face a struggle to recover their public standing; never mind ailing profits as the cost of operating a bank in the new post-crash regulatory environment goes up.
Overall, consumer opinion of their UK retail banks has improved, despite the trials at the Co-op, said the Foundation. The overall approval rating given by UK consumers to retail banks in the country this year was 43%, rising from a lowly 19% in 2011, which although not good does represent an improvement. The representation of the sector is likely to have taken a further hit, however, after the activities of the Reverend Flowers. 2014 could end up being just as touch as any year since the 2008 crash.
By Asim Shah and Neil Ainger