Co-Op Lose Control of Bank Arm as Energy Prices Soar

The Co-Operative group has confirmed that it will lose majority ownership of its banking arm.

In June earlier this year, the bank announced that it needed £1.5 billion to plug a capital shortfall, however has now announced that it will require an additional £105 million to fund PPI refunds, arrears charges and redress to mortgage account holders. Under proposed rescue plans, the group will now retain only a minority stake in the bank, but will continue to operate under the existing brand and ethics.

Further to this, an error by Co-op bank meant that some mortgage customers were charged interest only on their first repayments of their mortgage and as a result were faced with higher repayments for the remainder of their term. The Co-operative will now offer compensation to customers who were affected by the bank error, however it is not yet known how much of the £105 million set aside by the bank will be assigned to these customers or how many customers and accounts have been affected.

Meanwhile, the economic recovery is expected to lose momentum in coming months as three of the ‘big six’ energy providers have this month announced significant price rises. NPower is the latest energy supplier to bump up their rates with a 10.4% average increase on dual fuel bills, after SSE and British Gas both announced price rises earlier this month.

As energy prices are set to shoot up, the Markit Household Finance Index, which measures consumer confidence for October remains well below the ‘neutral’ mark of 50, sitting at just 41. Research indicates that just one in four households expect their finances to improve over the next year as income continues to fall behind living costs.

While the cost of living continues to increase, research released by supermarket giant Tesco, has revealed that families are wasting an estimated £700 a year on wasted food. Tesco has now pledged to help its customers reduce waste and save money, after admitting to throwing away 30,000 tonnes of food in the first six months of this year alone.

As households across the UK continue to struggle with the ever increasing cost of living, the news that Co-Op bank is to set aside further funds to compensate its customers is of course a welcome announcement in helping the many people affected by the PPI scandal reclaim what is rightfully theirs. However, the revelation of another banking error, this time in the form of incorrect mortgage repayments, coupled with the news of Co-Op’s failed rescue will no doubt rock the already dwindling confidence of Britain’s consumers.