Feb 26 The Co-operative Bank's deal to buy more
than 600 branches from Lloyds Banking Group is under
threat as the Co-op faces a 1 billion pound capital hole, the
Financial Times reported on Tuesday.
The Co-op's capital deficit is the first to emerge from
regulators' analysis of balance sheets after the Bank of
England's Financial Policy Committee suggested that the
shortfall across the sector could be as much as 50 billion
pounds ($76 billion).
The Financial Services Authority is expected to outline
individual deficits in the coming weeks, the FT said.
A list of options would be presented to the Co-op's board
next month, the FT cited one person with knowledge of the
Co-op's plans as saying. Three other people, however, told the
financial daily that it was highly unlikely that the Lloyds deal
would be kept alive.
The FT cited two people close to the matter as saying the
bank was hoping to find a partner from continental Europe,
possibly a mutually owned organisation like the Co-op, to join
the Lloyd's bid.
"We are continuing negotiations with Co-op and are making
good progress in creating a stand-alone challenger bank," Lloyds
said in an emailed statement.
A spokesman for the Co-op said it remained in talks with
Lloyds regarding the purchase of the branches.
The FT also reported that the Co-op - a
food-to-funerals conglomerate of which the bank is a part - is
planning to sell its non-life insurance business to address the
billion pound capital deficit.
In addition to the non-life insurance unit, the Co-op could
sell its pharmacies business, while further capital could be
released through selling parts of the bank's loan or mortgage
book, the FT said on its website.
The Co-op reached an agreement to buy 632 branches from
Lloyds Banking Group last July in a deal that would transform
its banking operation into a serious rival to Britain's dominant