APPG on Fair Business Banking raises ‘deep concerns’ over rumoured hedge fund bid for Cooperative Bank

The All-Party Parliamentary Group (APPG) on Fair Business Banking has published a letter from its co-chair, Kevin Hollinrake, to the governor of the Bank of England, Andrew Bailey, regarding the rumoured bid for the Cooperative Bank by the US hedge fund, Cerberus. While Hollinrake acknowledges that such an approach has not yet been confirmed by the bank, he raises his ‘deep concerns’ about the possibility.

The letter highlights the Cerberus £13.3bn acquisition of the former Northern Rock mortgage book in 2015, which it says left 270,000 mortgage customers with lower levels of regulatory protection. Hollinrake recalls Bailey’s acknowledgment earlier this year, when he was chief executive of the FCA, that the regulator does not have the same level of regulatory oversight of offshore inactive lenders as it does over UK-based lenders, as well as the Financial Ombudsman Service (FOS)’s confirmation in October that for unregulated entities the FOS’s ‘rules and guidance on lender conduct, including treatment of vulnerable customers do not apply’.

This lesser regulatory burden is, Hollinrake says, one of the reasons that ‘offshore unregulated vulture funds’ are willing to pay more for loan portfolios than UK regulated entities, and as a result hundreds of thousands of mortgage holders and businesses have been subjected to ‘years of substandard treatment as a direct result of Cerberus’ exploitative and aggressive behaviour’.

Hollinrake flags that, as customers are often attracted by its reputation of ethical and sustainable practices, the sale of a significant stake in The Cooperative Bank to a vulture fund would be of particular concern.

The APPG urges Bailey to take action to prevent any future sales of significant stakes in regulated lenders or mortgage books to unregulated entities and to work with HM Treasury and the government to introduce legislation to do so. It suggests that the Financial Services Bill, currently in committee stage in the House of Commons, would be ‘a timely and suitable opportunity’.

Source: Letter to Andrew Bailey (Governor of the Bank of England)—APPG on Fair Business Banking—20/11/2020