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Ex-Co-op chief and PRA clash over cause of financial woes

Alistair Cunningham Index

Former Co-operative Bank and Britannia Building Society chief executive Neville Richardson has told MPs Britannia is not to blame for the Co-op’s financial woes, contradicting evidence given by the Prudential Regulation Authority.

The Treasury select committee is carrying out an inquiry into the deal to sell 632 Lloyds Banking Group branches to the Co-op, known as Project Verde, which collapsed in April. The Co-op Bank announced a £1.5bn rescue plan in June.

Britannia merged with Co-op in January 2009 to create what it called a super-mutual. Richardson left the Co-op in July 2011, saying he disagreed with the level of “change programmes” underway.

At a hearing into Project Verde last week, MPs grilled Richardson on the extent to which Britannia’s loan book is to blame for Co-op’s current problems, and whether these stem from mortgage books acquired from failed sub-prime lender GMAC-RFC.

Richardson said Britannia accounted for around a third of impaired assets at Co-op, and said Britannia had carried out appropriate due diligence on all loan books bought from GMAC.

But when PRA chief executive Andrew Bailey appeared before MPs in July, he said Co-op’s impaired assets were largely driven by Britannia loans.

A Bank of England spokeswoman says:“We strongly disagree with Neville Richardson’s view regarding the Britannia loan book situation. The evidence Andrew Bailey gave to the TSC was correct.”

Chadney Bulgin mortgage partner Jonathan Clark says: “It beggars belief that Co-op did know what it was taking on with Britannia, when it was known Britannia did some quite creative mortgages and given the backdrop of the financial crisis.”

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