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City minister questions Co-op treatment of bondholders
Lord Myners quizzes the government over the Co-op capital rescue plan.
Former City minister Lord Myners has questioned whether the suspension of coupon payments to Co-operative Bank bondholders ‘constitutes unfair treatment’ in a session in the House of Lords.
Myners addressed a series of questions to the government over the way the £1.5 million capital shortfall at Co-op Bank has been dealt with and the impact it has had on investors.
As part of its capital rescue plan the Co-op has proposed to swap £1 billion of its ‘junior’ debt, lower ranking debt including permanent interest-bearing shares (Pibs) and preference shares (both types of bonds) that are held by retail investors, into a new type of equity share.
The plan has been criticised as punishing retail investors, many of them pensioners, who rely on the income they receive from the Pibs. Investors in the 13% Pibs have already been denied the coupon payment they were due to receive yesterday following a ruling from the Prudential Regulation Authority.
Now Myners has questioned whether the delay of the coupon payment until October when the rescue plan is finalised is fair. In a session in the House of Lords he asked the government if it was going to investigate whether the suspension of the interest payments to bondholders would ‘constitute unfair treatment of customers’.
He also wants the government to look at whether the Co-op Bank has breached its terms and conditions by failing to make interest payments.
Myners said he was concerned that Pibs investors had been given ‘assurances’ by Co-op Group employees ‘that might have misrepresented the capital status’ of the bank and ‘constituted the making of a guarantee by the…group’.
He also wants the government to confirm that the financial advice the Co-op has promised to provide to bondholders facing a debt-for-equity swap is ‘independent of any firm advising the Co-operative Group and Co-operative Bank’ and that it will protect any advice given and its disclosure from ‘interference’ by the bank.
The government has also been urged to investigate why the financial regulator gave no warnings about Co-op bonds or the bank’s capital shortfalls, even though it did so for Barclays and Nationwide. The financial regulator should also be investigated for allowing ‘a false market in securities’ issued by Co-op group and bank,’ said Myners.
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