Co-operative Bank has appointed a new chief executive as part of a shake-up designed to preserve the stricken bank.
Niall Booker, the former head of HSBC in North America, replaces Barry Tootell, who resigned after the bank's debts were downgraded to 'junk' status by credit ratings agency Moody’s (read more).
The bank is discussing with regulators how much it needs to raise to repair its balance sheet, which is expected to be in the region of £1.8 billion.
Much of the shortfall has been attributed to bad commercial loans the bank acquired during the takeover of the Britannia Building Society in 2009.
The episode is expected to end the stay of the group’s head of finance, Steve Humes, who will be pressed to resign by the group's new chief executive, Euan Sutherland, after two years in the role.
A number of UK banks need to raise a collective total of £25 billion to strengthen their capital bases. Until now, relatively few details had emerged about the shortfalls of individual banks.
The Co-op has sought advice from Swiss giant UBS about its position, and could yet sell off or close its banking division.
It has already ceased new lending to businesses, and says that an “extensive review” is needed before the future of the banking arm is decided.
But the group is thought to be considering a clawback of large bonuses awarded to those who presided over this critical period.
Peter Marks, the recently-departed group chief executive, received bonuses approaching £600,000 over the last two years as the bank slid inexorably towards crisis point.
And Neville Richardson, the former Britannia boss, received a compensation package of £1.4 million for loss of office following the takeover, despite the toxic assets from the takeover causing many of the Co-op’s financial woes.
Mr Booker, the Co-operative Bank’s new boss, offered little sign of surrendering the bank to closure, though he did concede that any turnaround of the bank would not be immediate.
"There are no quick fixes here, but with the support of the Co-operative Group, our staff and our loyal customer base, I am confident we will be able to stabilise and develop the franchise," he said.
"I will be focused on the actions to strengthen our balance sheet and satisfactorily resolve our underlying issues."
Keith McDonald
Which4U Editor
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