Osborne denies Treasury pushed for Co-op/Lloyds deal
CHANCELLOR George Osborne has denied the Treasury pressed for a deal for Co-op Bank to buy 632 Lloyds branches.
In a letter to the Treasury Select Committee, Mr Osborne said the deal “was a matter for Lloyds and the-then regulator, the FSA”.
The former chairman of Co-op Bank, disgraced former Methodist minister Paul Flowers, and rival bidder Lord Levene have both accused the Treasury of interfering.
The chancellor has been answering questions about the Co-op issue at a hearing of the Treasury Select Committee.
Labour MP Pat McFadden said the committee had heard “conflicting advice on whether there was political pressure”, citing testimony from Lord Levene, who was leading a rival bid.
In written evidence submitted in January, Lord Levine wrote: “We had contacts with senior banking figures, during which it was made clear to us that pressure on LBG [Lloyds] to appoint the Co-op was coming from within the Coalition.”
The Chancellor denied there had been an attempt to interfere in the process.
But according to a report by the BBC’s Newsnight, the Treasury disagreed with the Financial Services Authority (FSA) over a rule that could have blocked the Co-op Bank’s potential takeover of 632 Lloyds branches.
Co-op Bank’s size meant its parent company should have been regulated like a bank under EU rules.
The FSA in 2012 wanted the rule to apply, but the Co-op said it would mean that the deal could not go ahead.
The Treasury argued that the rule should not apply. The FSA clashed with the Treasury in March 2012, and the Co-op warned members it may not go ahead and do the deal it had been working on for a year, Newsnight revealed.
But the waiver was approved by top bank regulator Andrew Bailey in June that year, and within weeks the deal was back on.
The Co-op proceeded with the bid before being forced to abandon it because of a £1.5bn capital black hole. The Lloyds branches were ultimately separated and now trade as TSB.
