The Financial Climate – Your Questions Answered

Following recent events in the financial industry, it's hardly surprising that many of you have questions about the safety of your savings and investments. We've asked our experts to answer a few of your most common questions.

How do I know my money is safe with The Co-operative Bank p.l.c.?

At a time when trust is a key issue for bank customers, The Co-operative Bank p.l.c. was recently voted ‘most trusted bank' in a poll by The Times newspaper. We don't think you gain that trust by accident.

We have a firmly embedded responsible lending policy, which reflects our belief that as customers and members, it's your money first and foremost, and you have a right to expect good stewardship.

The Bank's financial position is strong, which is reflected in our credit rating - The Bank's long term ratings with Moodys and Fitch are A2 and A (negative outlook) respectively reflecting its low credit risk. The negative outlook, is consistent with Fitch's view on the wider market, and not a reflection of specific issues for The Co-operative Bank p.l.c. The Bank's short term ratings are P-1 and F1 respectively, which are the strongest ratings available for the repayment of short term financial commitments.

The Co-operative Bank p.l.c. also has one of the highest liquidity ratios in the marketplace. Find out more in our financial results.

Will The Co-operative Bank p.l.c. encounter problems if the UK has a recession?
Although we are not immune from the economic situation, our performance in the first half of this financial year clearly demonstrates that as a business, we are achieving steady growth.

We are also investing for growth in our business. This investment will ensure that we are able to provide products to our customers and members that are absolutely in line with our co-operative principles of value, fairness and social responsibility – and we're confident that this will help our business grow further still.

I have a mortgage with The Co-operative Bank p.l.c., is what happened to Northern Rock or HBOS likely to happen to you?

No. A crucial difference between ourselves and many of our competitors is that we do not borrow in the financial markets in order to lend. Our lending capital is generated from customers' investments and savings, leaving us a good deal less exposed to the vagaries of the market than many of the major lenders.

The HBOS situation in particular highlights the risks to businesses whose shares are traded on the stock market, where in this case they have become exposed by business speculators. Our corporate structure means that we are accountable to The Co-operative Group and its members and aren't at the mercy of speculators who have no affinity with our business.

How will what's happening affect my pension/investment with The Co-operative Investments?

The Co-operative Investments is in a sound financial position. It has good levels of capital to cover liabilities and it has always avoided some of the more risky financial practices that have led to the difficulties that other financial services organisations have experienced in recent months.

As regards your investment, all investments are subject to an element of risk; in particular investments linked to stocks and shares, are clearly influenced by movements in these markets. This type of risk is an essential part of the investment and is present whichever company you invest with. It is very important to keep in mind that investments should normally be taken for the medium- to long-term so it is essential to take a considered view and not make snap decisions. We always recommend that you regularly review your investments; if you have any concerns you should speak to your Financial Adviser .

Any guarantees that have previously been made on a pension or investment will remain. While anyone with a pension that is currently being paid out will not be affected by any movements in investment markets.

What is the Financial Services Compensation Scheme?

The Financial Services Compensation Scheme is the UK's compensation fund of last resort for customers of financial services firms.

The Financial Services Compensation Scheme pays compensation if an authorised financial services firm is in default, meaning it is unable, or likely to be unable, to pay claims against it. This will generally be because it has stopped trading and is insolvent – for example, it doesn't have enough money to cover what it owes to its customers and creditors.

The Scheme will pay compensation to customers for financial loss. The amount paid will depend on the basis of the customer's claim.

There are maximum limits that apply to each claim. These limits are per person (per firm and type of claim). Find out more.

The Scheme is free to consumers and funded from levies imposed on regulated firms.

It's important to remember though that compensation will only be paid if a firm is in default.

Which parts of CFS are covered by the Financial Services Compensation Scheme?

The following firms are individually covered by the Financial Services Compensation Scheme:

Is my money covered under the Financial Services Compensation Scheme?

Yes, provided you are what's called ‘eligible.' This means private individuals, some small businesses and anyone who has a compulsory insurance policy.

In the event that a firm is unable to cover claims against it, the scheme provides compensation to customers of up to a limit of £50,000 to depositors for the total of their deposits with an organisation.

Find out more about the compensation scheme and The Co-operative Financial Services.

Is it true that CFS is having exploratory talks with Britannia Building Society?

Yes it is. In light of anticipated legislative changes that will make it easier for different types of mutuals to work together, exploratory talks are taking place.

View our full statement