Co-Operative Group Ltd. former Chief Executive Officer Peter Marks defended his role in the acquisition of Britannia Building Society and the pursuit of Lloyds Banking Group Plc (LLOY) branches amid criticism from lawmakers.
“You seem to be very gung-ho about expanding the financial services,” lawmaker Brooks Newmark said in a hearing of the Treasury Committee in London today. “The responsibility has to lie somewhere. You are the group CEO, you are the main man, you are in complete denial.”
The Co-Operative Group yesterday agreed to cede control of its banking unit to creditors as part of a deal to plug a 1.5 billion-pound ($2.4 billion) capital shortfall. Marks, who retired as CEO of Co-Operative Group in May after about six years in the position, denied responsibility for the lender’s 2009 merger with Britannia, which Bank of England Deputy Governor Andrew Bailey has said was the “main issue” that led to losses at Co-Operative Bank Ltd.
The Britannia transaction was managed by the bank rather than the group and was an “error” in hindsight, Marks said.
It was right for the Co-Operative Group, which traces its roots to Britain’s 19th century industrial north, to consider buying 632 branches, known as Verde from Lloyds, he said.
“Britannia has turned out to be not a good deal for the bank,” he said. “I don’t accept it was a mistake to give a lot of consideration to Project Verde. Project Verde would have transformed the bank.”
Co-Operative Group’s loss of control of its banking unit may be a “good thing” because it will make the company concentrate on its other units, Marks said. The Manchester, England-based company owned by seven million members, operates supermarkets, drug stores, funeral parlors and a law firm. Even so, it is a “tragedy,” Marks said.
“If I failed in anything, I failed to get the group to consider” focusing on some businesses over others, Marks said. The Co-Operative Group “had been run like that for more than 150 years.”
After today’s hearing, Co-Operative Group Chairman Len Wardle, 69, said he will retire in May, in a statement. He joined the company in 1992 and has been in his current position since 2007.
“In August this year, I informed the board that it was my intention to step down at the end of my term,” Wardle said in the statement. “The Co-Operative is at its best when it is reforming and I want this change to continue.”
The company suffered “a lack of personal accountability at senior levels, ineffective corporate governance and insufficient experience and expertise among those taking the decisions,” Treasury Committee Chairman Andrew Tyrie said in an e-mailed statement after the hearing. “Being owned by a mutual, the Co-Op Bank differed from most of its competitors. But on today’s evidence, its shortcomings did not.”
-- Editors: Jon Menon, Steve Bailey
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