The former chief executive of The Co-operative Bank yesterday accused his successors of taking their "eye off the ball" ahead of the lender's failed bid to buy more than 600 Lloyds branches, a move which exacerbated a £1.5bn capital hole in its accounts.
MPs are investigating why the deal under which Co-op was to buy the Lloyds branches collapsed this year.
In evidence that appeared to contradict statements made by Bank of England deputy governor and Prudential Regulation Authority CEO Andrew Bailey in June, Neville Richardson told the Treasury Select Committee (TSC) that, at the time he left the Co-op in 2011, the mutual's finances were in good shape.
In spring 2013, the lender looked poised to buy 632 TSB branches in a takeover named Project Verde. But the deal collapsed, Moody’s downgraded the lender to ‘junk’ status and, by June, it was struggling to fill a £1.5bn capital hole.
Richardson said his successors were distracted by large projects.
“The eye has been taken off the ball. Because of Verde, the loan books have not been managed properly, as with the rest of the business.”
Formerly the chief executive of the Britannia Building Society, Richardson became The Co-op Bank's boss after the two mutuals merged in 2009. But by 2011, he said he was increasingly worried about the number of projects the bank was taking on.
Project Unity, a restructuring programme, particularly concerned him, he said.
The Co-op group’s senior executives ignored his warnings that the strategy was “disastrous”, Richardson said. After the board overruled him, he left by mutual agreement in July 2011. He took on roles at M&S Bank and Countrywide, but resigned after the Co-op’s capital troubles emerged in June this year.
The summons by the TSC gave Richardson the floor for the first time to speak about his decision to leave the Co-op, after his contractural gagging clause elapsed.
When MPs also grilled him on the legacy of the Britannia loan books, Richardson said he had “no idea” why regulators would be worried. Impaired loans within the boom-era Optimum portfolio were “quite normal”, he said, and would not have gone bad if customers were quickly given a chance to make their repayments.
He insisted the Co-op Bank would be in better shape if he was still in charge: "If I had known that Verde would be as all-consuming as it was I would not have been in favour of it at all."
Richardson's remarks contradicted evidence given by PRA chief Andrew Bailey earlier this year.
Following Richardson's hearing in front of the TSC, The Co-op issued a statement saying: "We strongly disagree with Neville Richardson's view regarding the Britannia loan book situation. The evidence Andrew Bailey gave the the committee was correct."
Andrew Tyrie, chairman of the TSC, said: "There appears to be a yawning gulf between the evidence the committee heard from Mr Richardson and the evidence we heard previously from Mr Bailey. The committee will be investigating this a good deal further."
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