Former-Co-Op Bank CEO told Ministers he warned against bidding for Lloyds bank branches
4 September 2013 Last updated at 17:31 Share this pageEmailPrint
Co-op Bank boss ‘warned against Lloyds deal’
The former chief executive of Co-op Bank has told MPs he repeatedly warned the Co-op Group board against a bid to buy more than 600 Lloyds bank branches.
Neville Richardson told the Treasury Committee he resigned in 2011 when his warnings were ignored.
He said the bid was the “right deal at the wrong time” and put Co-op Bank at “unacceptable risk”.
MPs are investigating why the deal between Co-op and Lloyds to buy the branches finally collapsed this year.
Lloyds had planned to sell 632 Lloyds Bank branches in a process known as Project Verde.
Co-op Bank withdrew its offer for the branches in April, blaming the “economic environment” and “increasing regulatory requirements on the financial services sector”. It was later found to have a capital shortfall of £1.5bn.
Speaking in front of the Treasury Committee in June, the chief executive of Lloyds, Antonio Horta-Osorio, said Lloyds had been aware of Co-op’s capital problems long before the deal collapsed.
Co-op announced plans to bid for the branches in 2011, two weeks before Mr Richardson resigned in July that year.
He said he had concerns that there were mounting pressures on Co-op Bank which meant it would not be able to cope with the branch acquisition.
The recent merger between Co-op Bank and Britannia Building Society was not yet completed, he said, and other significant reforms to the business were also being undertaken.
“I had expressed my grave concerns and as it was clear to me that my experienced view was not going to be acted on, my position became untenable and we mutually agreed that I would leave,” he said.
Mr Richardson was chief executive of Britannia before it merged with Co-op Bank in 2009.
Last month, the merged bank reported a loss of £709m, with nearly £500m in write-downs – largely related to Britannia’s loans portfolio.
But Mr Richardson said the current problems at the Co-op could not be laid at Britannia’s door.
“Such losses amount to around one-third of the impairments and significant items as reported by Co-op Bank over the last eighteen months,” he said, and commentary suggesting that the loans were all “toxic” at the time they were issued “lacks credibility”.
But in response, the Bank of England, which regulates banks through the Prudential Regulation Authority, said: “We strongly disagree with Neville Richardson’s view regarding the Britannia loan book situation.”