Credit union still banking with the Co-Op Bank?

You might have seen today’s – I have to say not completely unexpected – news that the Co-Op is up for sale.

It’s been coming for a long time.

So, you’re a director of a credit union that is still banking with the Co-Op that still has hundreds of thousands of pounds in it?

Let me ask you something …Why is that?

Is it simply that because you believe in the co-operative movement you will support it where ever you can?

That’s great, the co-operative movement has done and continues to do a lot of really very good things.  But the problem is if you’d been acting on purely commercial grounds – which is the test you are required to satisfy as a director – you would probably have moved the money out of the Co-Op a long time ago.

Let me ask you, given that there’s no certainty that the Co-Op Bank can be sold, and won’t instead be either broken up or go bust, do you think you might be playing Russian roulette with your members’ money given today’s news – which after all followed a pretty inglorious few years (facts like this will be relevant to the points below, it’s not as if you’re in the dark about the Co-Op Bank’s problems or that they’ve happened overnight)?

The point is you might only have a short period of time now to get your members’ money out of the Co-Op and into something safer…

And if you don’t do so, let me ask you another question…

If your credit union should be forced under by the problems at the Co-Op Bank and your liquidator took you personally to court for negligence, would you be able to defeat such an action?

It might just be worthwhile you asking your lawyers this question… you see, your following a principle that is not built on hard commercial grounds is probably no defence.

Oh, and an afterthought… some directors of your credit union will have deeper pockets than others and will therefore be the main targets of such a negligence action.  Are you one of the prime targets? You see it’s easier for board members who have nothing to lose personally to stick to their principles, but if your home and savings are on the line, then it’s a completely different proposition.

Credit Unions – it’s far from good news, in fact it’s awful!

I don’t know if you saw the news today?  – How the UK’s credit union assets hit £3 billion for the first time ever?  – click here to see the news from ABCUL

Great news, eh?

Well no…

Why?

Well, today, yes the very same day that ABCUL announced this ‘great news’ about assets, a letter hit my desk from the Co-Op Bank saying that they are reducing the interest they will be paying on bank balances me as liquidator of credit unions, and indeed credit unions themselves, hold with them.

The interest rate?    O.03% on balances up £500k.  That’s right, one thirty third of one per cent in interest.

To put it bluntly, bugger all on balances most credit unions might be holding with the Co-Op Bank…about one fiftieth of the inflation rate.

Please let me ask you something…

What’s exactly is the point of credit unions putting their savers’ money with the Co-Op?

Why do they do it?

The vast bulk of the £1.23 billion in credit union saver deposits – the ‘good news’ is its ‘s by 7.8% over the previous year –  yes, one and a quarter billion pounds, a lot of money, and counting! – is earning nothing for savers, not after the credit union costs.

I tell you what the point of credit unions putting their savers’ money with the Co-Op and them paying nothing in interest is…

The Co-Op is bust…

And if it goes under – and it is a shambles – the FSCS also goes under, its pocket is simply not big enough to cope with the Co-Op’s failure.

Put another way, all you savers in credit unions are propping up a bust bank because (1) Co-Operatives are incapable of surviving in this country today in the way they used to be able to, and management are incapable of turning the Co-Op Bank around, it’s a shambles internally; (2) The FSCS cannot pay out if the Co-Op goes bust – we’re talking about a bail-in, rather than bail out (a bail out, some government organisation pays you back all your money: a bail in, you do not get all your money back, you have to write some of it off, you might be told that the £1,00 you had with so and so bank is no only £500.

If Co-Op goes bust, there will be a run on all of the banks.  Co-Op is propped up by credit union savers’ and other ‘soft’ money – if you’re a saver in a credit union, have you really asked where the credit union puts your money?  Hopefully time will paper over the cracks at the Co-Op…- but will it, and why haven’t you been told that your money is at risk, why are you being told that credit unions are a good place for you to put your money safely?

Thanks to all you savers, old and new, you are propping up a bust bank that we cannot afford for it to fail because the system can’t cope with it doing so!

Oh, did no one, not ABCUL, not any credit union, tell you why you’re being encouraged in?

It’s a huge game of pass the parcel!

If you are a saver, you are playing the game, the problem is you’ve no chance of winning a prize, because the music will never stop when you’re holding the parcel.   Instead you’ll be left holding all the wrapping paper for which you will have paid handsomely, and you’ll not get your money back because you will be bailed in…

Still happy with the advice you got to ‘save’ with that credit union?

Will you be suing the advisor for bad advice, like the PPI sellers of yesteryear?

President, Chair or Director of a credit union that’s struggling? – read our great offering…

If you are the president, chair or a director of a credit union that is struggling, possibly even insolvent, the last thing you need is another bill, but the first thing you need is great support from people who have been down this road before.  Yes, credit unions are very, very different from most other organisations…

With this in mind, we are offering you a great deal:

  1. We will never charge you for either our travelling time or travelling expenses – whether this be pre- or post any formal insolvency appointment;
  2. Our first meeting with the board to assess your situation and explore with you your options is entirely free of charge.

This means that wherever you are in England or Wales you can be assured of getting the best possible support, when you need it most, without having to worry about what it costs.

Call me on 01902 672323, or my mobile 07813 102014, if you’d like to know more about how we can help you…

Paul Brindley

Licensed insolvency practitioner & Credit Union expert

 

President, Chair or Director of a credit union that's struggling? – read our great offering…

If you are the president, chair or a director of a credit union that is struggling, possibly even insolvent, the last thing you need is another bill, but the first thing you need is great support from people who have been down this road before.  Yes, credit unions are very, very different from most other organisations…

With this in mind, we are offering you a great deal:

  1. We will never charge you for either our travelling time or travelling expenses – whether this be pre- or post any formal insolvency appointment;
  2. Our first meeting with the board to assess your situation and explore with you your options is entirely free of charge.

This means that wherever you are in England or Wales you can be assured of getting the best possible support, when you need it most, without having to worry about what it costs.

Call me on 01902 672323, or my mobile 07813 102014, if you’d like to know more about how we can help you…

Paul Brindley

Licensed insolvency practitioner & Credit Union expert