Co-op in the spotlight

The UK Treasury Select Committee is carrying out an enquiry into the collapse of the deal to sell 632 Lloyds Banking Group branches to the Co-op.  Appearing before the committee Neville Richardson, the former Co-operative Bank Chief Executive, has given evidence which appears to be at odds with that given by the Chief Executive of the Prudential Regulation Authority, Andrew Bailey; in particular with regard to the extent to which the Britannia deal affected the strength of the group.

Commenting on the Britannia merger and Lloyds bid Mr Richardson said “trying to carry out one major change programme is a challenge, two major change programmes is asking for trouble, and three is asking for failure.”  He added that at the same time the mergers were in progress the group was carrying out a cost saving programme which would have put some areas of the Co-op Bank under the control of the wider Co-op group.  In Mr Richardson’s view this was “putting financial services people under the control of those who were not financial services people” and “was causing very major disruption.”

Mr Richardson also acknowledged that the Lloyds deal was seen as a once in a lifetime opportunity but that he had “always taken the view that this does not make it an imperative to carry out a transaction if the timing is wrong.”

Major change programmes, cost saving initiatives, “once in a lifetime” opportunities:  whatever the final judgement of the Select Committee, this investigation has cast a spotlight on some of the key operational risk areas, as well as highlighting the way in which the perception of operational risk can come down to the judgement of the senior management.

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