The Treasury select committee has cleared the Treasury of any inappropriate interference in the Co-op Bank deal to buy Lloyds Banking Group branches but has criticised the failures of the FSA, KPMG and the Co-op board.
In a report into the Project Verde deal, published today, the TSC said there was “scarcely any evidence” of political interference despite serious accusations.
The sale of 632 Lloyds Banking Group branches to the Co-op Bank in 2012 collapsed in April 2013 after the mutual uncovered a £1.5bn capital black hole.
Former NBNK chief executive Lord Levene, who was a rival bidder, said former Bank of England governor Lord Mervyn King was concerned about political interference.
At the Conservative party conference in Birmingham last month, FCA director of authorisations Victoria Raffe said it came under “massive” political pressure to rubber stamp the deal but could produce no specific inappropriate examples.
TSC chair Andrew Tyrie says: ““It is not uncommon for deals to collapse. But in this case it was caused by the near collapse of Co-op Bank itself. Each of the backstops—Co-op Bank, KPMG as its auditor, and the FSA as its regulator—failed to uncover the bank’s capital shortfall until it was too late.
“Each had a hand in this sorry tale. But by far the biggest responsibility lies with the Co-op Bank leadership.”
Tyrie dismissed Lord Levene’s accusation that politicians were specifically involved in the deal as unsubstantiated.
He says: “It seems improbable that any such political interference could have been concealed by so many people and for so long.
“The Government publicly stated its support for Co-op’s bid, but the committee has not seen anything to suggest that this constituted improper pressure or bad faith on anyone’s part.”