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Co-operative Bank halts new business lending Co-operative Bank halts new business lending
(about 4 hours later)
Co-operative Bank has stopped offering new business loans amid concerns over its capital position.Co-operative Bank has stopped offering new business loans amid concerns over its capital position.
The bank is continuing to provide lending to existing customers, but has frozen lending to new corporate customers.The bank is continuing to provide lending to existing customers, but has frozen lending to new corporate customers.
Lending to individual retail customers is unaffected.Lending to individual retail customers is unaffected.
The bank is currently in discussions with UK financial regulators over the amount of cash it needs to hold in reserve, along with other UK banks.The bank is currently in discussions with UK financial regulators over the amount of cash it needs to hold in reserve, along with other UK banks.
In a statement, the Co-op said the decision to freeze new business lending was part of "an extensive review of the Co-operative Bank, its capital and lending position and its commercial strategy", which is "ongoing".
Balance sheet concerns
"An early decision, taken in March of this year, was that the primary focus of the banking business is to be directed at serving and expanding our presence amongst retail customers, whilst continuing to support our existing business customers," the statement said.
"We would not, at this time, look to grow our corporate lending business by lending to new corporate customers."
Earlier this month, the rating agency Moody's downgraded the Co-op's debt rating to "junk" status, citing concerns over the strength of the bank's balance sheet.Earlier this month, the rating agency Moody's downgraded the Co-op's debt rating to "junk" status, citing concerns over the strength of the bank's balance sheet.
The Co-op later admitted it needed to "strengthen our capital position in light of the broader economic downturn and the pending introduction of enhanced regulatory requirements". The UK bank regulator, the Prudential Regulation Authority (PRA), is currently talking to banks about whether they need to raise more capital to shore up their cash reserves, including the Co-op.
The UK bank regulator, the Prudential Regulation Authority (PRA), is currently talking to banks about whether they need to raise more capital to shore up their cash reserves. In March, the Bank of England said UK banks needed to raise cash reserves by £25bn over the next year, but did not give details of which banks were in need of cash.
In March, the Bank of England said UK banks needed to raise cash reserves by £25bn over the next year.
Lloyds Banking Group and Royal Bank of Scotland have already announced that they do not need to raise money externally to meet capital requirements.Lloyds Banking Group and Royal Bank of Scotland have already announced that they do not need to raise money externally to meet capital requirements.