BOE Rubbishes Richardson Assertion Britannia Didn’t Ruin Co-Op

The Bank of England clashed with former Co-Operative Bank Plc Chief Executive Officer Neville Richardson over his assertion that the purchase of Britannia Building Society didn’t bring the bank to the brink of collapse.

Richardson said Co-Operative Bank purchased a “successful” customer-owned lender in 2009 and defended Britannia’s loans, in evidence to lawmakers in London today. Bank of England Deputy Governor Andrew Bailey told Parliament in July the “main issue” for the Co-Op “was around the Britannia assets.”

Co-Operative Bank must raise 1.5 billion pounds ($2.4 billion) to fill a capital hole and said last month that its capital has been depleted by soured consumer and commercial real estate loans stemming from the purchase of Britannia. Loan impairments more than quadrupled to 468.7 million pounds in 2012 as the bank posted a pretax loss of 673.7 million pounds.

“We strongly disagree with Neville Richardson’s view regarding the Britannia loan book situation,” the central bank said in an e-mailed statement following Richardson’s testimony. “The evidence Andrew Bailey gave” to Parliament “was correct.”

Richardson, 56, who is also a former head of Britannia, said Manchester, England-based Co-Op Bank was in “good shape” when he left the bank in July 2011. Only a third of the Co-Operative Bank’s losses in 2012 and the first half of 2013 were linked to Britannia, he told lawmakers.

“There appears to be a yawning gulf between the evidence the committee heard today from Mr. Richardson and the evidence we heard previously from Mr. Bailey,” Treasury Committee Chairman Andrew Tyrie said in an e-mailed statement. “The Committee will be investigating this a good deal further.”

Warning Ignored

Richardson said the lender’s owner ignored his warning about the “disastrous” consequences of buying 632 branches from Lloyds Banking Group Plc. He told the board of parent Co-Operative Group of the risks of the transaction, yet then-group CEO Peter Marks wanted to proceed, he said. The plan to buy the Lloyds branches was abandoned in April.

“The deal as such was one which I could understand,” Richardson said. “The problem that I have talked about is about the timing of the deal and the capability of Co-Op Bank at that time.”

-- Editor: Jon Menon

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