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 Article written by Robert Peston Robert Peston Economics editor

Can Balls be just austere enough?

Can Ed Balls persuade investors he would reduce Britain's public sector deficit just enough, while not demoralising Labour supporters who want an end to the long years of austerity?

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +1

    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
    0

    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
    0

    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
    0

    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

 

Comments 5 of 55

 

Features

  • Peaky Blinders publicity shotBrum do

    Why is the Birmingham accent so difficult to mimic?


  • Oliver CromwellA brief history

    The 900 year story behind the creation of a UK parliament


  • Image of Ankor Wat using lidarJungle Atlantis

    How lasers have revealed an ancient city beneath the forest


  • TheatreBard taste? Watch

    Are trailer videos on social media spoiling theatre?


  • Agents with the US Secret Service, such as this one, are responsible for guarding the presidentHard at work

    White House break-in adds to Secret Service woes


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.