In a letter to Mark Taber, who represents small bondholders, Andrew Bailey, head of the Prudential Regulation Authority (PRA), said that while he sympathised with investors, a “successful economy” was the PRA’s priority.
“Tthe PRA has a general statutory objective to promote the safety and soundness of the firms we supervise, focusing on the adverse effects that they can have on the UK financial system,’ said Mr Bailey, according to a letter seen by the Mail.
“This is our primary consideration in the judgments that we make in the course of our supervision of firms. A stable financial system is necessary for a healthy and successful economy,” he added.
Mr Bailey also rebuffed calls from Mr Taber for a review of the restructuring plan.
“The PRA has always been clear that the way in which that extra capital was to be raised was a matter for the Cooperative Bank itself,” he said.
The Co-op launched a raid on bondholders to help raise £1.5bn to plug a black hole in its books. The ‘bail-in’ of approximately 15,000 junior bondholders all but wiped out their investments.
Mr Bailey’s remarks were in response to a sternly worded open letter written by Mr Taber this month, in which he accused the watchdog of taking “punitive and disproportionate” actions towards the bank.
Mr Taber said the PRA’s actions had caused an “unavoidable standoff” which could result in “unnecessary nationalisation” of the bank.