* Richardson says deal created unacceptable risk
* Richardson says Britannia not to blame for Co-op problems
* Regulator says strongly disagrees with parts of evidence
* MPs investigating demise of branch purchase
By Matt Scuffham
LONDON, Sept 4 The former boss of the
Co-operative Bank said he opposed plans to buy 630
branches from Lloyds Banking Group and stepped down in
2011 because the board of its parent, the Co-op Group
, failed to heed his warnings.
Co-op Bank pulled out of the 750 million pound ($1.2
billion) deal in April following nearly two years of
negotiations amid concerns over its capital position. Britain's
financial regulator has subsequently said it must raise 1.5
billion pounds to plug a hole in its finances.
In written evidence to British lawmakers, Neville Richardson
said Co-op had too much on its plate integrating the Britannia
Building Society, which it purchased in 2009, and a further deal
would have created "unacceptable risk".
"I had expressed my grave concerns and, as it was clear to
me that my experienced view was not going to be acted on, my
position became untenable and we mutually agreed that I would
leave," he told the Treasury Select Committee, which is
examining why the deal collapsed.
In separate evidence, Co-op said it had not been set an
explicit date by the regulator to reach a 3 percent leverage
ratio target. Co-op Group's new chief executive Euan Sutherland
is working to convince bondholders to approve a lifesaving
funding proposal to fill the bank's 1.5 billion capital gap.
Under the plan, Co-op Group will provide 1 billion pounds -
half from disposals and restructuring and half from bank loans.
It hopes to fund another 500 million from writing down the value
of its bonds.
Richardson also denied that bad loans acquired through the
bank's purchase of Britannia, where he was once chief executive,
were the main reason for the Co-op's problems, a view expressed
to the Treasury Select Committee by regulator Andrew Bailey.
Richardson said Britannia was a "strong organisation" and he
had "no idea why he (Bailey) would say that given the figures I
have in front of me".
The Bank of England said in response: "We strongly disagree
with Neville Richardson's view regarding the Britannia loan book
situation. The evidence Andrew Bailey gave to the TSC was
Co-op's 2012 accounts showed impairment losses of 469
million pounds, including 351 million pounds of impairments from
its non-core business. Co-op said the bulk of its latest bad
loans stemmed from Britannia's corporate real estate loan book.
Richardson said Bailey informed Co-op's board of his
misgivings about the Lloyds deal, code named "Project Verde", at
a dinner in July 2011 and suggested Co-op link up with a
partner, possibly Rabobank.
Richardson said he had expressed his owns concerns over the
plan to group chief executive Peter Marks and chairman Len
Wardle, and stepped down when it became clear they would pursue
Richardson said he had subsequently been vindicated and
suggested the Verde deal would have had disastrous consequences
had it proceeded.
"What kind of inquiry would the committee be undertaking now
if the deal (Verde) had gone ahead and then collapsed, with
consequences that could well have been a replay of Northern Rock
and the institutional crises that crippled the global financial
system in late 2008," he said.
Richardson said the Verde negotiations contributed to
Co-op's management losing focus on the integration of Britannia
and distracted them from running the rest of the bank.