Co-op given a warning over Lloyds in 2011
THE CO-OP Bank was warned in 2011 by the Bank of England that it needed to do more work to successfully take over 632 Lloyds branches – an effort which failed almost 18 months later.
A letter from top regulator Andrew Bailey from December 2011 was published yesterday laying out his concerns over capital and governance.
He told MPs yesterday that the Co-op had passed this information on to Lloyds, contradicting some previous evidence to the Treasury Select Committee.
Bailey, who heads the prudential regulation authority at the Bank of England, said the root of the collapse of the so-called Verde deal was the legacy of bad loans at the Co-op.
The biggest cause was the bad debts it acquired when it merged with the Britannia Building Society, Bailey said.
“The Co-op merger took the Britannia out of the spotlight, but it did not solve the underlying problem,” Bailey said.
“Ultimately Verde could not be done without solving the underlying problem of capital. Risk management and governance could be dealt with, and were, but capital ultimately defeated it.”
Bailey also denied the Bank of England had turned a blind eye to manipulation in the foreign exchange markets.
It comes after claims that officials were told that traders at different banks would discuss the rates in advance of the fixes.
But Bailey said there is “no evidence” the Bank was told of the alleged collusion. The Financial Conduct Authority is investigating, with Bank of England support.