Former Co-op boss says he warned bank over-stretched


The story of the financial calamity at Co-op Bank, which has necessitated a £1.5bn rescue, became a good deal more complicated today - with the evidence provided to MPs on the Treasury Select Committee by Neville Richardson, the former chief executive of the bank.

The most serious claim he made was that in 2011 the bank's owner, Co-op Group - led by its then chief executive Peter Marks - was bossing him and his fellow bank executives to take on too many so-called "change programmes", namely the sale of an insurance operation, the replacement of IT systems, imposition of a new management structure giving Co-op Group more control (called Project Unity) and the possible purchase of 630 branches from Lloyds (Project Verde).

Mr Richardson felt it was all too much for the bank, that its ability to manage itself prudently would be imperilled, and in mid-July he told Mr Marks so.

Rather than change the strategy of this medium-sized bank, Mr Marks took the view that it would be better if Mr Richardson left the bank - which he did, in Mr Richardson's words, "by mutual agreement".

Mr Richardson did not under-state the significance of this disagreement. He said that the "catastrophic failure" we have subsequently witnessed at Co-op Bank was because his warnings were not heeded.

What is slightly odd is that MPs did not ask Mr Richardson whether he shared these warnings about what was going wrong at Co-op Bank with regulators at the Financial Services Authority - the City watchdog now replaced by the Prudential Regulation Authority.

It would be normal practice for regulators to interrogate a departing bank chief executive on the reasons for his departure. So what on earth did they glean at the time?

This matters because it is now clear that Co-op Bank was in subsequent weeks and months chronically over-stretched.

Mr Richardson made another important claim, which is that Andrew Bailey, chief executive of the Prudential Regulation Authority (PRA), was wrong when he said that at the heart of Co-op Bank's current woes was bad lending by Britannia Building Society - which Mr Richardson previously ran and which merged with Co-op Bank in 2009.

He said Co-op's bad debts and losses are largely down to bad management of the loan book after he left Co-op Bank, other one-off losses unrelated to Britannia, and the imposition of a more conservative approach to assessing the quality of loans imposed on all banks by regulators at the end of 2012 and in 2013.

The PRA reacted immediately. It said: "We strongly disagree with Neville Richardson's view regarding the Britannia loan book situation. The evidence Andrew Bailey gave to the Treasury Select Committee was correct".

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 55.

    Lee -wasted the best part of a billion pounds on failing to build a new IT platform
    -appointed by his mate Nev as the Exec to deliver the biggest IT programme in Coop history - even though the biggest IT change he was in charge of previously was changing a light bulb in the Leek !
    Unbelievably Richardson's response at yesterday's TSC was to say he would have delivered it if he'd have stayed !

  • Comment number 54.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 53.

    Looks like it is pointy finger time. Someone wasn't paid off to become the scapegoat. Oh dear!

    How is the Scottish investigation into Fred the Shred getting on? Slow, oh so slow.

  • rate this

    Comment number 52.

    Richardson is keen to claim he opposed Verde on prudent management grounds. It is possible to put another construction upon his actions- namely that he knew of the parlous financial state of the banks finances and the reasons, and that this would unravel to reveal his disastrous tenure at Britannia and dodgy deal.

  • rate this

    Comment number 51.

    Mr Richardson, must take the responsibility for the actions of his leadership team, his head of change Phil Lee was cashing cheques for change programmes like they were going out of fashion without any care for governance or budgets.

    He can't pass the blame for this onto Mr Marks

  • rate this

    Comment number 50.

    Having worked at the Coop for almost 14 years pre & post the Britannia merger, in my opinion for what it's worth I can honestly say that things went downhill fast when Mr Richardson was at the helm.

    Mr Marks the grocer tried to run a bank but couldn't run a bath, trying to grow too big too fast, however it wasn't the proposed purchase of lloyds branches that made the debt, that was already there.

  • rate this

    Comment number 49.

    He would say that wouldn't he.

  • rate this

    Comment number 48.

    Funny how the Group are trying their hardest to deflect blame onto Bank. They and the FSA agreed this disastrous sale of Brittania to Co-op without any due diligence, Richardson should be proud of himself. You've dragged a once respected Bank into the gutter by moving on Brittania's rubbish. Nice one Nev.Was the pizza worth it ? Shocking way to run a business.

  • rate this

    Comment number 47.

    Time for a public enquiry - this, the regulator, the PRA's approach to bank capitalisation & justification for it etc.

    Richardson has accused Bailey of misleading or lying to the Committee, the PRA has accused him of the same - get them both back there same day and grill them! Having seem Bailey's evasive, unhelpful responses to bondholders queries so far - these people need challenging.

  • rate this

    Comment number 46.

    The simple theory is that Richardson was another bank boss cutting the meat too close to the bone.

    The changes he criticised are not unheard of; they were, for example, successfully accomplished by the company Aviva, formerly Norwich Union et al. The cupboard at the Co-op was too 'Fred-bare' for such changes as no doubt Richardson knew.

  • rate this

    Comment number 45.

    We keep hearing that is was Britannia that was the problem, surely this can be shown to be right or wrong quite easily ?

    Personally i think the anti Coop/mutual rhetoric is quite enlightening ,are the majors actually losing customers to the mutuals? are they seen as a threat to the cosy cartel we have ?

    But this seems to be a simple problem to sort who is telling the right story.

  • rate this

    Comment number 44.

    The only thing to be sure of is that the senior management of all institutions involved weren't fit for purpose. For if they were they would have stood up and been counted at the time rather than after the fact when muck is being racked. There must be questions still hanging over the proficiency of the management team still in place and their ability to take the bank forward.

  • rate this

    Comment number 43.

    Reading between the lines Richardson must have known that buying 631 branches from Lloyds would put a spot light on the disastrous buying of Britannia. Marks was oblivious of it so saw the 631 branches as a good move which in wasn't. Now we have the renamed FSA in the shape of PRA exposed as another paper tiger.

    All the banks are bust sooner or later our fiat currency will be replaced.

  • rate this

    Comment number 42.

    Yes maybe it is a little unfair but its far nearer to the truth than you could ever imagine.
    How many members of the public, customers or Britannia members knew that Nev and his Board were "dabbling" £2 billion of their money in the commercial sector ? Answer is hardly anyone - so don't be surprised if the staff were in the dark. Go find me anything which shows that market knew of this strategy

  • rate this

    Comment number 41.

    All banks are insolvent.
    They lend out money they do not "have".

    And money they do "have" is money conjured out of the air by other banks. Marks on pieces of paper. Bits and bytes set in computer memory.

    Such is the system, life, that we live in

  • rate this

    Comment number 40.

    @capitalismhurts - that's a little unfair to generalise Britannia staff like that

  • rate this

    Comment number 39.

    Post 25, Can I have what you are drinking? Co-op bank and no political donations? Rubbish!
    What about the Labour Party and its huge overdraft with the Co-op bank or the Co-op's support of Ed Balls and many other Labour MP's as well.

  • rate this

    Comment number 38.

    Friendly yes - like a favourite Uncle or a nice bloke down the pub.
    Unfortunately Britannia staff are on the whole pretty clueless from a banking aspect and they are not necessarily to blame for this debacle. Most of the staff didn't even know that their company was involved in commercial lending. The most complex piece of work most of them got involved with was updating a granny's passbook.

  • rate this

    Comment number 37.

    So who's telling porkies then? Not much point in telling the old Fundamentally Supine Authority anything, they would do SFA about it, worse than useless! Pretty good at going for nice long lunches though. One can only hope the new crowd are a tad better than the old lot.

  • rate this

    Comment number 36.

    I worked at what was Britania Building society, as a contractor, and I found them to be one of the most friendly companies I have ever worked for. Their work/leisure ethos was second to none. I have never worked for Coop Bank but having spoken to people who have worked for both I wouldn't give tuppence for the Coop bank ethos.


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