is about the uk bank . for other similarly named banks see co operative bank disambiguation . for the general concept see cooperative banking . the co operative bank plc type public limited company industry banking & finance founded 8 november 1872 8 november 1872 headquarters 1 balloon street manchester united kingdom products asset management commercial banking credit cards loans mortgage loans project finance retail banking treasury operating income 420 million 2015 1 net income 512 million 2015 1 total assets 22.8 billion 2015 1 total equity 1.57 billion 2013 1 owner the co operative group 20 % stake number of employees 7 526 2013 1 website co operativebank.co.uk the co operative bank plc is a retail and commercial bank in the united kingdom with its headquarters in balloon street manchester . the bank markets itself as an ethical bank and seeks to avoid investing in companies involved in certain elements of the arms trade fossil fuel extraction genetic engineering animal testing and use of sweated labour as stated in its ethical policy . the ethical policy was introduced in 1992 2 and incorporated into the bank s constitution in 2013 . 3 in 2002 the parent company the co operative group limited brought the bank and the co operative insurance society under the control of a newly incorporated holding society co operative financial services which became the co operative banking group in 2011 . as britain s seventh biggest lender 4 the majority of the bank s revenue is made from interest charges on loans . 1 in 2013 14 the bank was the subject of a rescue plan 5 to address a capital shortfall of about 1.9 billion . 6 the bank mostly raised equity to cover the shortfall from hedge funds while the co operative group became a minority shareholder 7 holding a 20 % 8 stake in the bank . 9 the co operative bank came 4th in the british bank awards 2016 . 10 contents 1 history 1.1 2013 financial crisis 1.1.1 2014 16 rehabilitation 2 membership prior to financial crisis 3 ethical policy 4 divisions 4.1 smile 4.2 britannia 5 independent financial advice 6 technical problems 7 controversies 8 see also 9 references 10 further reading 11 external links history edit the stockport pyramid building provides administrative services including a call centre for smile and the co operative bank . the bank was formed in 1872 as the loan and deposit department of the co operative wholesale society becoming the cws bank four years later . however the bank did not become a registered company until 1971 . 11 in 1975 the bank became the first new member of the committee of london clearing banks for 40 years 12 and thus able to issue its own cheques . in 1974 the co operative bank offered free banking for personal customers who remained in credit . it was also the first clearing bank to offer an interest bearing cheque account in 1982 . the co operative in balloon street manchester following the uk government s acquisition of 43.4 % of lloyds banking group in 2009 the co operative bank entered into negotiations with lloyds banking group to purchase over 600 of its branches . european commission laws restricting state aid required the sale of the branches in a divestment known as project verde . in february 2012 press reports suggested that the financial services authority fsa might intervene to block the purchase due to concerns about the co operative bank s ability to integrate it systems . it was rumoured that the fsa was particularly concerned that the co operative bank was still behind schedule in the integration of its it systems with those of the britannia building society despite the fact that the merger took place in 2009 . 13 the purchase was publicly announced in july 2012 and it was revealed that the branches would be initially split from lloyds under the resurrected tsb brand . 14 on 24 april 2013 the co operative bank announced that it had decided against proceeding with the deal . the reasons given were the poor economic outlook in the uk and an increase in financial regulation requirements . 15 the financial times had previously reported that the co operative would require a 1 billion increase in capital to support enlarging the bank . 16 2013 financial crisis edit the co operative bank branch in ealing west london in march 2013 the bank reported losses of 600m . in may moody s downgraded its credit rating by six notches to junk ba3 resulting in the chief executive barry tootell s resignation . 17 over the weekend of 15 16 june 2013 negotiations between the co operative group and its regulator the prudential regulation authority culminated in reports 18 19 that the bank had a shortfall in its capital of about 1.5 billion and that this would be filled by a procedure known as a bail in scheme . bank chairman paul flowers resigned shortly before the announcement of the shortfall . 20 a press release 5 by the bank issued on 17 june 2013 explained that the scheme would compel subordinated also known as junior bondholders to convert some or all of their assets from debt instruments to ownership equity shares of uncertain value which would be listed on the london stock exchange and a new fixed income instrument . the scheme contrasted with the rescues of other british banks in 2008 and 2009 when central government introduced new capital into the failed institutions . details of the outcome for small retail investors in the bank were uncertain at the time of the june announcement but it should be noted that there was no suggestion that ordinary deposits in the bank would be put at any additional risk by the rescue as they would continue to be covered by the existing compensation scheme . the bondholders had the opportunity to seek to reject the restructuring proposed and an alternative option of the bank of england taking over the ownership of the bank under the banking act 2009 special resolution regime was considered . 21 in september it was discovered that there was a 3.6 bn funding gap between the value the co operative bank placed on its loan portfolio and the actual value it would realise if forced to sell the assets . 22 in october it was reported that the co operative group had been forced to renegotiate the bank s 1.5 bn rescue with us hedge funds aurelius capital management beach point capital management and silver point capital that owned its debt . as a result the group would lose majority control of its banking arm with the proportion of the bank s equity remaining under its ownership dropping to 30 % less than the 75 % proposed in the original rescue plan . 7 the plan passed a creditor vote and on 18 december 2013 a judge on the uk high court allowed the plan to move forward . 23 24 an independent review commissioned by the bank published in april 2014 concluded that the root of the bank s problems lay in its 2009 takeover of the britannia building society and poor management controls . 4 2014 16 rehabilitation edit the bank s current chief executive niall booker a former banker at hsbc who nursed hsbc s sub prime lending business back to health 25 was appointed in 2013 . 26 since then he has been attempting to refocus the bank s strategy as a retail and sme lender . 9 flotation on the london stock exchange was planned for 2014 27 but the plans were abandoned 28 in march 2014 when a rights issue was announced to raise an additional 400 million . 29 in may 2014 the bank finalised the 400 million fundraising plan and obtained shareholder approval which reduced the co operative group s ownership of the bank to just over 20 % . 6 8 the co operative bank lost 38 000 current account customers in the first half of 2014 after suffering what it called a hurricane of negative publicity following the lender s near collapse . 30 however this loss was partly offset by 9 700 who switched to the bank double the number who joined six months earlier 30 resulting in a net loss of 28 199 customers around 2 % of the bank s total . 31 the rate of loss slowed significantly in 2015 resulting in a loss of 2 250 current account customers between january and august of that year . 32 nevertheless the bank reported progress in its rehabilitation as its losses sharply narrowed and it strengthened its capital position . figures released by the bank in august 2014 for the first half of the year showed a pre tax loss of 75.8 million was identified compared to 844.6 million for the same period in 2013 . 31 33 co op bank also said its core tier 1 capital ratio a key measure of financial strength stood at 11.5 percent at the end of june and was expected to be significantly above the previous guidance of 10 percent at the end of 2014 . 4 however the bank as expected was unable to meet the new bank of england financial stress tests in december 2014 . 34 35 in late 2014 the bank sold its repossessed properties business for 157.5 million 36 and its atm operating business for 35 million . 37 it also outsourced its mortgage servicing operation to capita transferring about 660 staff to capita . 38 the narrowing of losses was driven largely by a faster than expected reduction in unwanted assets including significant parts of the portfolio of sub prime mortgages the bank inherited from its merger with britannia building society . 30 non core assets reduced by 1bn and credit impairments improved . 1 in august 2014 the bank said it had cut staff numbers by 21 percent about 1 560 workers in the previous year and that there were more job losses to come . the bank had also closed 46 branches reducing its branch network by 16 percent since the start of 2014 . another 25 would close in the remainder of the year it said . 4 in august 2015 the bank said that it had closed 62 branches over the previous year taking the total down to 165 . this was partly due to a 28 % drop in in branch transactions resulting from a change in demand from branch to internet banking . 32 by that point staff reductions had exceeded 2000 workers . 26 after the closure of 54 branches during the first three months of 2016 the bank described its programme of branch closures as mostly finished . 39 in december 2014 a bank of england assessment measured the bank s core capital ratio a measure of financial strength at minus 2.6 % . as a result the bank appointed bank of america merrill lynch to help sell 6.6 billion of mortgages . 40 the bank is not expected to make a full year profit until 2017 at the earliest . 35 in august 2015 booker said that he expected the bank would be part of the consolidation of some of the country s smaller banks and that stock market floatation would remain an option for the future . he said that there had been no meaningful discussions concerning the suggestion that the hedge funds which own 80 % of the bank s equity were looking at buying up the co operative group s remaining 20 % holding . 41 on 1 april 2016 the bank announced a pre tax loss for 2015 of 611m more than double the loss of 264m for 2014 . booker s salary rose to 3.85 m from its 2014 level of 3.1 m an increase of 24.2 % . 42 membership prior to financial