Legal Business

PPI costs drive Co-op Bank’s legal risk expense up 91%

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Regulatory Co-operative Bank
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The Co-operative Bank’s legal risk expenditure almost doubled in 2015 mostly to address issues caused by the mis-selling of payment protection insurance.

The challenger bank’s conduct and legal risk costs shot up 91% from £101.2m in 2014 to £193.7m in the last year, which according to the bank, related to ‘legacy issues’.

The bank’s annual report and accounts for 2015 showed that £71.8m of the charge comprised of increases for PPI complaints, and that £58.3m was used for CCA unsecured unenforceable interest or the wrongly charged interest that it was forced to return to consumers, and a further £40.4m to redress customers.

The bank also incurred a £58.3m cost relating to unenforceable interest, and a further £98.7m increase in the CCA conduct provision.

The charge increases come as the bank’s annual pre-tax losses have more than doubled to £610m up from £264m in 2014.

The in-house legal team at the bank is led by the former interim general counsel of Coventry Building Society Brona McKeown, who took over from former Allen & Overy (A&O) partner Alistair Asher in 2013, after he was appointed to head the legal function across the entire Co-operative Group. McKeown’s team comprises 21 lawyers including deputy GC Claire Morris who joined from Nationwide Building Society last year.

In September last year, the bank appointed 11 firms to form its legal supplier three-year panel with firms like Clifford Chance, A&O and Pinsent Masons winning places after a competitive tender.

jaishree.kalia@legalease.co.uk

For more on financial regulation and litigation see: ‘The end of the tunnel – litigation and regulatory challenges in financial services’

 


Legal Business

Mishcon, A&O and Matthew Arnold Baldwin win places as The Co-op Bank unveils 11-strong inaugural legal panel

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Adviser reviews Co-operative Bank
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The Co-operative Bank has appointed 11 firms to form its legal supplier panel with firms including Clifford Chance (CC) and Pinsent Masons winning places after a ‘competitive tender and detailed interview process.’

The three-year legal panel comprises Magic Circle firms CC and Allen & Overy, as well as Berwin Leighton Paisner, Mishcon de Reya, Hogan Lovells, Pinsents, TLT, Eversheds, and DLA Piper. Smaller outfits Bates Wells Braithwaite and Matthew Arnold Baldwin also won positions on the panel which is effective immediately.

In a statement issued today (2 September), the co-operative said the panel was selected ‘to meet the bank’s needs for full UK coverage, its commercial objectives, demonstrating industry leading best practice and a proven ability to work closely with the bank’s in-house legal department. In addition, the bank’s requirements for specific areas will be supported to cover media, technology and charities work.’

The legal division is overseen by former interim general counsel (GC) of Coventry Building Society Brona McKeown where she serves as legal chief and company secretary. McKeown’s team comprises 21 lawyers including deputy GC Claire Morris who joined from Nationwide Building Society this year.

The announcement follows the high street lender avoiding a substantial fine in an investigation by the Financial Conduct Authority and the Prudential Regulation Authority for breaching listing rules, on which the bank retained Clifford Chance to advise.

sarah.downey@legalease.co.uk

Legal Business

The Co-operative Bank

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In-house Co-operative Bank
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  • General counsel and company secretary: Brona McKeown.
  • Team headcount: 21 lawyers.

With the bank mired in controversy for much of 2014, the legal team at The Co-operative Bank has received recognition and admiration within the industry for ‘ably managing the bank’s legal affairs during a particularly challenging time’.

This is no understatement: in March 2013 the bank reported losses of £600m and two months later Moody’s downgraded its credit rating to below investment grade. Chief executive Barry Tootell resigned in the summer and negotiations between The Co-operative Group and its regulator, the Prudential Regulation Authority, resulted in reports that the bank had a £1.5bn shortfall in capital. Further scandal emerged over its governance that led to the resignation of chairman Paul Flowers, and the health of the bank was called into question after stress tests in December showed a severe economic shock would exhaust it.

The legal team has been cited by a Magic Circle firm for its outstanding ability to manage affairs amid the turbulence. It is led by the former interim GC of Coventry Building Society Brona McKeown, who took over from former Allen & Overy partner Alistair Asher in 2013, after he was appointed to head the legal function across the entire Co-operative Group.

Heavyweight names in the team include head of treasury legal, Adam Moy, a former GC at Close Brothers Group and lawyer at Skadden, Arps, Slate, Meagher & Flom, who is responsible for legal and regulatory risks across the business units. Others include disputes head Lesley Wilkinson, the former head of professional negligence at Optima Legal and manager of regulatory change at HBOS, and senior solicitor David Travis, who qualified at DLA Piper and previously worked in-house at Citigroup and RBS International. He now leads the commercial team that is responsible for the negotiation of major supply contracts, and major projects, including the strategic separation from The Co-operative Group.

It is further credited for work done on the £400m capital raising exercise last March, which led to a number of investors, including hedge funds Silver Point and Perry Capital, further investing in the share capital of the bank, in addition to ongoing regulatory shifts and inquiries in the banking sector.

Legal Business

Team check-up: Co-op group reorganises legal team and starts panel assessment

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Adviser reviews Co-operative Bank
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The Co-operative Group‘s general counsel Alistair Asher and head of legal Jim Tully are to lead an assessment into the British consumer group’s panel firms as the group’s legal team undergoes a reorganisation.

The legal team are assessing external counsel, evaluating previous work and corroborating legal spend. It is understood that the assessment is in the very early stages, and that the in-house team won’t carry out a formal review. The Co-operative group has a historic legal panel and has worked closely with a wide range of firms in the past including Allen & Overy, Addleshaw Goddard, Burges Salmon and Weightmans.

The group is also undergoing internal restructuring, with Tully reorganising the 40-strong legal department into more business facing groups under a target operational model.

Ex-A&O global financial institutions head Asher and former Addleshaw Goddard corporate partner Tully lead the in-house department for the beleaguered group, which reported pre-tax losses of £2.5bn for 2013 – the largest ever for the organisation.

Asher joined in 2013 following the identification of a £1.5bn capital shortfall in the Co-op bank. He joined as group general counsel – a newly created role which is part of the group executive committee. Tully, who joined the company on secondment from Addleshaw Goddard, was permanently appointed at the beginning of this year.

Following the sell-off of its pharmacy business, travel business and most of the bank, the group has become significantly smaller in recent months – now operating along the business lines of food, funerals and insurance.

kathryn.mccann@legalease.co.uk

Legal Business

Shearman settles controlling stake in Co-operative Bank for US hedge funds

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Finance Co-operative BankShearman & Sterling
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Behind the scenes of the first-ever creditor bail-in of a bank in the UK.

Last month The Co-operative Group’s £1.5bn recapitalisation plan for its beleaguered banking arm unravelled as subordinated bondholder activists advised by Shearman & Sterling negotiated hard and settled on a controlling stake of 70% of the shares of the bank.

Under the agreement, bondholders including US hedge funds led by Aurelius Capital Management and Silver Point Capital – dubbed the LT2 Group as they hold subordinated bonds – will receive 70% of the shares in The Co-operative Bank plus £100m in newly-issued securities. They will also inject £125m of fresh capital into the bank while parent company The Co-operative Group will retain a 30% stake.

Legal Business

Still in the headlines – Embattled Co-op appoints new GC for bank amid group shake-up

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In-house Co-operative Bank
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The Co-operative Bank (Co-op) has announced the appointment of former interim general counsel (GC) of Coventry Building Society Brona McKeown as legal chief and company secretary shortly after current GC Alistair Asher moves to head the legal function across the Co-operative Group.

Prior to Coventry Building Society, McKeown held a variety of roles at Barclays, culminating in global GC of Barclays Corporate. McKeown, who trained as a lawyer at CMS Cameron McKenna, joins the Manchester-based bank on 2 December.

In a statement, the bank said: ‘Reporting to Niall Booker, chief executive of The Co-operative Bank, Brona will oversee the bank’s legal and governance functions and act as the key link for those functions across the bank’s stakeholders, including the bank’s executive and board. She will also be a member of the bank’s executive committee. She will also lead and develop the bank’s own legal department and will work with Alistair Asher, The Co-operative Group general counsel, in respect of legal support services.’

McKeown’s move comes amid sustained controversy at the group after chairman of the bank Paul Flowers resigned and was later arrested facing a number a number of allegations, resulting in group chairman Len Wardle also stepping down from his position.

Earlier this month high-profile ABS Co-operative Legal Services (CLS) has also confirmed that it is to make around 60 redundancies in its 140-strong personal injury division as part of a restructuring, with a formal consultation beginning in the New Year.

In September, CLS posted a £3.4m loss for the first half of 2013. The loss comes despite turnover in the Co-op’s legal arm growing by 5.8% on last year to £18.1m.

Also earlier this month, Clifford Chance (CC) was handed a role advising the ailing Co-operative Bank on its recapitalisation as the bank prepares to float next year. The Co-op has been in negotiations since it emerged in June that its bank had a £1.5bn capital deficit due to non-performing loans. Asher joined the Co-op this summer from Allen & Overy, which is advising on its restructuring.

francesca.fanshawe@legalease.co.uk

Legal Business

A&O finance veteran joins Co-op

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Strategic recruitment Allen & OveryCo-operative Bank
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Alistair Asher takes on GC role as firm acts on major bank rescue

Securing a major deal and having one of your partners take a senior role with the same client is a nice trick to pull off but Allen & Overy (A&O) appeared to have managed that last month after securing a lead role on the Co-op’s rescue plan and ‘donating’ a veteran partner to the lender’s management team.

On 18 June, A&O confirmed that global financial institutions head Alistair Asher is leaving to join the Co-operative Bank as its new general counsel.

Asher will advise on the restructuring of the mutually owned lender and help speed up its management overhaul under its new chief executive Euan Sutherland. Asher retired on 1 July after 34 years with the Magic Circle firm and took on the new role immediately. The veteran partner had previously advised the Co-op on its 2009 merger with Britannia Building Society.