Britannia deal not the sole cause of Co-op crisis says Anderson

FORMER Co-operative Financial Services chief executive David Anderson says a combination of factors led to the near collapse this year of the Co-op Bank.

Appearing before the Treasury Select Committee today, Mr Anderson said that while he took responsibility for the merger in 2009 with Britannia Building Society – it alone was not the sole cause for the current crisis.

“As ever when something goes disastrously wrong, it tends to be a series of things that went wrong rather than just one,” he said.

Along with the bad commercial loans – from the Britannia book (some £500m) he said management stretch caused by pursuing the Project Verde deal to buy 634 branches from Lloyds Bank, £300m in write offs on an IT project linked to the failed Verde deal, a £300m PPI compensation bill and changes in regulatory and capital requirements made the situation “pretty hard to withstand.”

Mr Anderson, who left the group shortly after the merger with Britannia, was quizzed at length by MPs on the committee who are investigating the failure of the Project Verde deal.

The role of KPMG, the Co-op’s auditor, and financial advisor JP Morgan and the scrutiny by the then regulator, the Financial Services Authority, into the Britannia deal, were also explored.

Mr Anderson said it was “difficult to foresee” that the Britannia’s loan book would be in as bad a state as it is now, due to the deep recession.

He stated three times, when under pressure from the MPs, that on their own the Britannia-related provisions of £550m, would not have been enough to bring down the Co-op Bank.

“For some considerable time afterwards this didn’t look like a daft thing to do,” he said.

He said that the decision to pursue the Britannia deal was the Co-op’s and that an internal team, rather than KPMG had led on the due diligence process.

Asked about PPI mis-selling, he said that such products were already being offered to customers when he joined the bank in 2005, and thereafter, he had overseen a reduction in the number of policies sold annually as he was concerned the bank was too reliant on unsecured lending and associated products.

He added: “I do not believe on my watch there was systematic PPI mis-selling.”