* Levene says considerable pressure applied to Lloyds
* Says Ex-BoE Governor King told him decision political
* Lloyds has denied political interference
* Lloyds says in 'good talks' with EU over TSB listing
By Matt Scuffham
LONDON, Jan 21 The ex-chairman of banking
start-up NBNK said he was told by former Bank of England
Governor Mervyn King that state-backed
Lloyds Banking Group's decision to sell hundreds of
branches to the Co-op was politically motivated.
Peter Levene told parliament's Treasury Select Committee
that King had informed him that NBNK's offer would not be
accepted at a meeting in May 2012 - a month before Co-op was
identified by Lloyds as preferred bidder.
"I was told by the Governor of the Bank of England that this
was a political decision," he told the committee, which is
examining the sale to see if there was undue political
interference behind it.
The decision by Lloyds to favour Co-op prompted allegations
that the coalition government, which had pledged to back
customer-owned financial-services businesses as an alternative
to mainstream banks, had encouraged the choice.
Levene said King told him that, regardless of the details of
its bid, NBNK's offer would not be accepted. As a result, he
said, the government had failed to ensure a new bank was created
to challenge established banks.
When asked by the chairman of the committee, Andrew Tyrie,
if he was alleging that Lloyds had acted in bad faith, Levene
replied "yes". He told Tyrie, however, that he had no plans to
take legal action and said later in the evidence session that he
had "no hard evidence" to back up his claims.
Lloyds was ordered to sell the branches as a condition of a
45 billion-pound ($74 billion) government rescue in 2008. It has
denied being subject to political pressure and disputed
suggestions of ministerial interference in the sale.
The sale collapsed last April when it emerged that Co-op
needed to plug a 1.5 billion-pound capital hole at its banking
arm. The full extent of its problems has subsequently emerged
with the bank falling under the control of bondholders,
including U.S. hedge funds, while its former chairman became
embroiled in a drugs scandal.
Levene said he personally handed a document to Lloyds
Chairman Win Bischoff which spelt out the risks of selling the
branches to the Co-op. Lloyds has said it has "no record or
recollection" of receiving that document.
"I gave the document to Sir Win. If he said I didn't give it
to him that's untrue," Levene told the committee.
Britain's Conservative and Liberal Democrat parties pledged
to promote mutuals to create a more competitive banking industry
when they agreed to form a coalition government in 2010. The
opposition Labour party has criticised their lack of progress,
with leader Ed Miliband announcing plans to create two new
challenger banks if his party wins the next election in 2015.
Following the collapse of the Co-op deal, Lloyds has
rebranded the branches as TSB and spun them off into a separate
entity which it intends to list on the stock market in 2014.
In written evidence to the committee, Bischoff said the bank was
engaged in "good discussions" with European regulators to enable
it to do so.