Co-op Bank unveils new ethical policy that bans lending to tax-avoiding companies
The Co-operative Bank has officially banned lending to companies involved in payday lending and those gambling and tax avoidance activities that it deems irresponsible as part of an effort to restore its ethical credentials.
The troubled bank, which last year gave majority control to its lenders as part of a £400m fundraising, has rewritten its ethical policies in response to a poll of 74,000 customers and staff.
Chief executive Niall Booker said the people surveyed had highlighted these types of borrowers as particular ethical worries. “While they know we are not doing a large amount of business with these [corporate customers], they still said this was a big driver for them,” he said.
Mr Booker said the Co-op Bank will take outside advice when it comes to setting the scope of tax avoidance that would bar a company from getting a loan from the bank. “There’s bona fide tax management and there’s tax avoidance. Some of this will be factual, and some of this will be judgmental,” he said.
The Telegraph understands that the bank will also introduce the living wage, currently set at £9.15 an hour in London and £7.85 in the rest of the UK, from its next pay review in April. This compares with the national minimum wage of £6.50 an hour.
The Co-op Bank worked with the Institute of Public Policy Research and other bodies to consider its new ethical policy, which also encompasses the bank’s existing priorities such as upholding human rights, protecting the environment and promoting animal welfare.
The company said it has turned down £1.4bn in potential business since it first introduced an ethical policy in 1992.
In 2013, the bank unearthed a £1.5bn black hole in its accounts that sparked more than a year of soul-searching for the wider Co-operative Group and brought about the resignation of two chief executives.
Euan Sutherland, who quit in March 2014 after 10 months leading the Co-op Group, described the mutual as “ungovernable”. The turmoil was compounded by a drugs scandal involving Paul Flowers, the reverend who chaired the Co-op Bank’s board leading up to its financial problems.
The society has since overhauled its structure and introduced a council of up to 100 members to safeguard its principles. The Co-operative Group has owned just over 20pc of the bank since a fundraising last May that handed majority control to the hedge funds that own the bank’s debts.