The Co-operative Bank was given “winks and nods” by politicians to finalise deals that ultimately led to its near collapse, according to the former chairman of the bank, The Rev Paul Flowers.
Flowers appeared before MPs on Wednesday to give evidence on the near collapse of the mutual under his leadership. He told them that he had taken full responsibility for the disaster by resigning.
The Co-op’s £1.5 billion black hole came to light back in April, when a deal to buy 632 Lloyds branches collapsed.
The troubles are said to have originated from a merger of the bank with Britannia Building Society, with which the bank acquired bad debt.
It has now reached a bailout deal, without the use of taxpayers’ money, which saw a 70% share of the company handed over to private hedge funds. Under the deal, 50 branches will be closed and hundreds more are under threat.
Labour’s John Mann accused the bank of allowing their apparent survival of the 2008 financial crisis to “go to [their] head”.
Flowers said, “We were being given considerable nods and winks by those in the treasury, that it was a wise and good thing to happen”.
“Mr Balls in particular was very supportive of that process [… by] talking with us and encouraging us, in the same way that conservatives did as well”.
“There were plenty of politicians who wanted to deal to succeed and were willing it on and in the treasury team at that time”.
He also said that there were “nods of support” from business secretary Vince Cable.
Flowers also agreed that the Co-op was “hulled below the water line”, and that they didn’t see it. He maintained that co-operatives and mutuals remain a good business model.
The inquiry, known as Project Verde, is still ongoing and is investigating the required divestment of the 632 Lloyds branches, and the collapse of the Co-op Bank’s deal to take over these branches.