UPDATE 1-Did Osborne apply pressure in Lloyds branches sale, UK lawmakers ask
* UK lawmakers to quiz Osborne about Co-op on April 3
* Finance ministry says branch sale purely commercial (Adds finance ministry reaction, background)
By Huw Jones
LONDON, March 27 (Reuters) - Britain's parliamentary treasury committee has asked finance minister George Osborne whether he or colleagues put undue pressure on Co-operative Group or Lloyds Banking Group over the sale of more than 600 Lloyds branches.
Paul Flowers, the former chairman of Co-op Bank, which nearly collapsed under massive debts last year, said this week that Osborne had pressured it to buy the branches from partially state-owned Lloyds, while Peter Levene, chair of rival bidder NBNK, has repeatedly alleged that political interference resulted in the Co-op Bank being named as the preferred bidder.
The treasury committee, chaired by Andrew Tyrie, is examining how Lloyds divested 632 branches upon the request of European Union regulators following its rescue by taxpayers during the financial crisis.
"A variety of views have been presented in evidence to the committee regarding the alleged extent of political involvement in this divestment process," Tyrie wrote to Osborne in a letter dated March 26 and made public on Thursday.
"Did Treasury Ministers or any Treasury officials at any time bring undue pressure to bear on the Co-operative Bank or Group, or Lloyds Banking Group, in respect of the sale of the Verde branches?"
Tyrie said the committee would ask Osborne about the matter when it interviews him about his recent Budget on April 3 and in the meantime had asked for a preliminary reply by Tuesday April 1 at the latest.
The committee also wants to know what contacts ministers and their officials had with regulators and UKFI, the body that manages Britain's stakes in Lloyds and RBS, regarding the bidding process.
A spokesman for Britain's finance ministry said that since the full extent of the situation at Co-op Bank became clear, George Osborne had ordered an independent investigation into the events at the Co-op Bank and the circumstances surrounding them.
"The selection of the Co-op and the decision on whether to proceed with the ... deal was a purely commercial matter for Lloyds Bank and the Co-op Bank, as the chairman and chief executive of Lloyds have consistently made clear. In the event, Co-op withdrew from the transaction," the spokesman said.
Flowers previously told the treasury committee last November there had been no interference or undue political pressure during the process.
The Lloyds branches in question have been rebranded under the TSB banner and will be floated as a standalone bank later this year.
(Reporting by Huw Jones; Editing by Sophie Walker)
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