The Co-operative Group has pulled out of its purchase of 632 branches from Lloyds Banking Group – a sale that would have turned Co-op into a high street banking group with 974 branches, three times its current size.
Here's our lowdown on what it means for you: What has happened? In July 2012, Co-op announced it was to buy the 632 Lloyds TSB branches from Lloyds Banking Group. It had been ordered to sell the branches – referred to as "Verde" – by the European Commission because the government had injected taxpayer funds into Lloyds during the financial crisis.
Why did Co-op pull out? Essentially, because they didn't think it was a good idea. A Co-op statement read: "The Board decided that it was not in the best interests of the Group's members to proceed further at this time. This decision reflects the impact of the current economic environment, the worsened outlook for economic growth and the increasing regulatory requirements on the financial services sector in general." What will happen to the Verde branches now? It is unlikely that another buyer will step in. Instead, Lloyds Banking Group intends to float the Verde branches on the stock market, creating a new bank that will be called 'TSB'. It has until November to do this.
A spokesman said: "The Group continues to make good progress in the creation of Verde as a stand-alone bank. Detailed plans are in place for a rebranding of the business as TSB which will be visible on the high street during the summer of this year, at which point the TSB Bank (Verde) will operate as a separate business within Lloyds Banking Group." How many/which customers are affected? Just under five million Lloyds customers were supposed to transfer to the Co-op, plus 7,000 staff, mainly comprised of Cheltenham & Gloucester customers, all Lloyds TSB Scotland customers and customers of some Lloyds TSB branches in England and Wales.
What will happen to those customers now? Lloyds Banking Group said there are 'no direct impacts to customers as a result of today's announcements', but they will become TSB customers once the floatation has happened.
Lloyds Banking Group added that it is "committed to ensuring that the transfer to the TSB Bank is as smooth as possible for customers and will seek to minimise any disruption during this process." Will I have to change any direct debit payments or do anything myself? Not in the short-term. Customers don't need to do anything and can carry on banking in the same way as they do now, accessing their accounts as usual via the branch, telephone and online banking.
Will the savings or current account rates change once those branches become TSB branches? In the short-term it's unlikely that any savings rates will change, but it remains to be seen how competitive the new TSB will be.