Embattled Co-operative Bank has admitted it is losing current account customers as its reputation takes a battering following its financial woes and the scandal involving its former chairman.
The group revealed in a statement outlining technical changes to its rescue fundraising deal that “recent events” were likely to have contributed to an increase in the number of customers switching current accounts to rivals.
But the Co-op said savers were so far sticking with the group, with its deposits remaining stable. The lender has been thrown into turmoil after regulators uncovered a £1.5 billion black hole in its finances and as the scandal surrounding ex-chairman Paul Flowers and his appointment refuses to die down.
Mr Flowers has been bailed after being questioned by police officers investigating allegations of drug supply offences. The 63-year-old Methodist minister stepped down from the bank in June and questions have since been asked about his competence in the role, exposing a lack of corporate governance controls in the mutual and across the entire wider co-operative movement.
The Co-op is now facing a full independent inquiry into its near-downfall, ordered by Chancellor George Osborne, while regulators the Prudential Regulation Authority and the Financial Conduct Authority are also considering an enforcement investigation into the bank and individuals.
There have also been fears over its ethical values as it seeks to secure a restructuring to plug its balance sheet shortfall, which will leave it controlled by a group of investors including US hedge funds.
The Co-op Bank said there might have been some “brand and reputational damage” from its recent woes but it was too early to judge the scale of the impact, and it sought to assure its overall performance was in line with management expectations.
It said: “These recent events, together with the competitive landscape in which the bank operates, the introduction of seven-day account switching and the associated increased competitor marketing activity at a time when the bank has been constrained in its ability to undertake its own marketing activity, may be a contributing factor to an increase the bank has seen in the switching out of current accounts.”
Its caution comes ahead of a crucial vote over the restructuring, which will see the Co-op Group end up with just a 30% stake.