By Huw Jones
LONDON, June 12 Britain's Co-operative Group
needs to be made more resilient after the bank's
surprise recent credit rating downgrade, a senior Bank of
England official said on Wednesday.
Andrew Haldane, BoE director of financial stability said
Co-op's situation was "plainly difficult."
He said a multi-notch downgrade to its credit rating to junk
status by Moody's had come as a surprise to almost everyone but
so far there had not been the sharp outflow of liquidity that
some might have feared.
"But further needs to be done to put Co-op in a situation of
resilience and sustainability," Haldane told parliament's
Treasury Committee, without elaborating.
Last week the Co-op Group appointed a new finance chief and
chairman for its banking division as it tries to persuade UK
regulators it can plug a capital gap without state help.
Haldane was being quizzed by lawmakers on his reappointment
to the BoE's Financial Policy Committee (FPC) whose task is to
spot wider risks in the financial system.
The FPC is requiring UK banks to collectively plug a 25
billion pound ($38.99 billion) capital hole by the end of this
year, with much of this accounted for by the Co-op bank, and
part-state owned Royal Bank of Scotland and Lloyds
Donald Kohn, who has been reappointed as an external member
of the FPC, told the treasury committee that the FPC was late in
telling banks exactly how much more capital they should hold.
Analysts say the capital shortfall at the Co-op could be as
much as 1.8 billion pounds.
The Co-op is selling its life insurance business to Royal
London for 220 million pounds and has put its
general insurance business up for sale.
The Co-op is considering more drastic action such as cutting
future payments to bondholders to help build up its capital
It has also stopped taking on new small business customers.
The clock is ticking as Britain's banking regulator wants to
approve plans from the Co-op and other banks on capital raising
by the end of this month.