Kelly’s Co-op report set to focus on Britannia deal
A KEY report into the near collapse of the Co-op Bank last year will blame poor governance at the organisation and argue that the merger with the Britannia Building Society was the major factor.
A leaked draft of the report by Sir Christopher Kelly , seen by the BBC, will be critical of the due diligence the Co-operative did on Britannia, describing it as “extremely cursory”. Impairments linked to the takeover totalled £560m.
Its findings are likely to enrage former members of the Co-op board including former Britannia boss Neville Richardson, who then joined the Co-op as head of its financial services business, who insist this version of events is incorrect.
The Kelly Report, commissioned by former Co-operative Group chief executive Euan Sutherland last year, will be published next week. It is the first of several investigations into the way the organiastion was run and the conduct of those running the Manchester-based mutual.
Still to come are reports from the Treasury Select Committee, the investigation by the regulator the Financial Conduct Authority and the inquiry by the Treasury.
The BBC says a draft of the report says that the Co-op Bank board did not have “their eye on the ball” during the takeover of the Britannia.
The report also says that there were major problems with the Co-op Group’s £1.57bn acquisition of the Somerfield supermarket chain in July 2008.
Both the Co-operative Group and the bank announced record losses in recent weeks. The group’s losses were £2.5bn for 2013 – with £2.1bn of that coming from the Co-op Bank.
The bank’s figure contained a trading loss of £1.44bn for the year to December, when the group effectively lost control of Co-op Bank – it now owns just 30%, with the rest held mostly by US-based hedge funds.
In defending his record and track record Mr Richardson, who resigned from the Co-op in 2011, nearly two years before its financial problems came to light, says it was only after his departure that the business became over-stretched.
He is on record as saying he warned the organisation it was taking on too much with its ambitious proposed deal to buy a chunk of Lloyds Bank.
He is expected to argue, if the final version of the Kelly report is the same as the draft, that not enough weight has been put on the Co-op Bank’s own impairments which could total more than £400m. The collapse of the deal to buy the Lloyds branches also left the bank with a bill of several hundred million pounds and a troublesome IT system costing £300m.
