Quite un-Co-operative

It looks like the stormy outlook for our nation’s banks continues. Not only are their balance sheets under continual scrutiny, but new regulatory requirements will also mean further adjustments.

With the Moody’s downgrade of the Co-operative’s banking business sending concerned ripples throughout the financial community, the spectre of a banking system in crisis re-appears.

How can this possibly be the case five years into the current financial situation? Is it possible that our banks have still not truly faced up to the shocking state of their balance sheets?

What is especially worrying about the Co-operative Bank’s situation is that they have only recently pulled out of a planned purchase of 630 branches from Lloyds.

So let’s try to get our heads round this.

A bank that has now been downgraded to junk status by a rating agency and is facing a shortfall in its capital of £1bn (possibly needing Government support) and just reported a whopping £674 million loss, was at the same time trying to buy 630 branches from another bank!

Bonkers? I think so.

There is still a whiff of fantasy in the air. It is as if our nation’s lenders think that by closing their eyes and wishing hard everything will return to the heady days of the recent past.

Anyone watching the excellent BBC Two series Bankers will be under no such illusion. A return to the excesses of the last 20 years (up to the crash) is not going to happen. Our banking system is only just underway with a long, painful retrenchment that may last a decade or more.

As business owners we must understand that the options for financing our operations have also changed. The landscape of alternative funding sources, such as pension-led funding, is likely to expand – and expand fast.

At least that is good news.

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