Co-op pulls out of buying Lloyds branches
Today the Co-operative bank announced today that it has pulled out of a proposed deal to buy 631 branches off Lloyds Banking Group.
The so-called “Verde Transaction” would have increased the Co-operative bank’s share of the current account market to 7%, creating a significant challenger bank presence on the high street.
Although the news is a blow to increasing banking competition on the high street, it had originally been feared that the Co-op would be leaving the banking sector altogether. These rumours turned out to be ungrounded, and have since been strongly denied by the Co-operative Group.
Instead of large-scale leveraged acquisitions, the bank will continue to pursue organic growth by convincing customers to switch their accounts over to the Co-op. Last year this approach saw the amount of people switching to the Co-op Bank grow by 8%.
But the key point of this development is the implications it has on banking competition, and the impact it will have on the ethical finance sector. Increased competition isn’t just about having more banks, it’s about having different types of banks as well.
The financial crisis was due to banks like HBOS becoming too big to fail without knowing the risks of the businesses they were buying. The Co-op Bank should be applauded for refusing to do the same thing, and will emerge stronger in the long run as a result.
We’ve seen huge demand and strong growth in the ethical finance sector over the last twelve months, and this will only increase when switching is made easier in September. Some research is suggesting that up to 14 million people may switch after the rules change. With more people switching than ever, this year could still be one of fantastic growth for ethical finance, despite today’s announcement from the Co-op.
Instead of conglomerated behemoths, Britain needs more local, mutual and ethical financial institutions. By avoiding HBOS-style acquisitions Co-op is staying true to its ethics, whilst also pursuing growth in a prudent and sensible way.
But if the government is serious about increasing competition it should take the bull by the horns and support local, ethical and mutual financial institutions. It’s essential that these branches now go to organisations that will put customers first and lend to the real economy, rather than being hoovered up by Britain’s broken big 5 banks like they were before.
This story was originally published at moveyourmoney.org.uk in 2013.