The Co-operative Bank has revealed that it is losing current account customers following a number of revelations at the bank, including the arrest of its former chairman Paul Flowers over drug allegations as well as customer concerns over its ability to keep its ethical stance once its £1.5 billion rescue plan has been finalised.
In an unexpected statement sent to the London Stock Exchange yesterday, the bank said that: "Recent events may have caused some brand and reputational damage, but it is too early to form a definitive view as to the extent of such damage."
It continued that these "recent events" had come at a time of increased competition in the current account market due to the introduction of the seven-day switching guarantee, and "may be a contributing factor to an increase the bank has seen in the switching out of current accounts".
The bank has found itself in the headlines for all the wrong reasons over the last few months following the discovery in July that it was facing a £1.5 billion hole in its balance sheet.
Its first restructuring plan was then rejected by investors and bondholders, leading it to draw up a second plan that will see its parent company, The Co-operative Group, only retain 30% ownership of the bank, with the remaining 70% going to a consortium of hedge funds and investors.
This has fuelled questions over whether the bank will be able to stick to its ethical principles in the future.
However, the bank has moved to reassure customers that its ethical foundations will be enshrined into its constitution going forwards.
Further damaging the bank's reputation was a film released about two weeks ago by the Mail on Sunday that allegedly showed the bank's former chairman buying illegal drugs.
Mr Flowers has since been arrested, leading Chancellor George Osborne to announce a full-scale review into the bank to investigate events leading up to the discovery of its £1.5 billion shortfall and the appointment of Mr Flowers.
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