Reports suggest that the governance structure at the Co-operative Bank will be blamed for its troubles over the last year in a publication looking at the institutions near-collapse due to be published next week.
Earlier this month, the Co-op Bank announced a loss of £1.3 billion for 2013 and said it did not expect to make a profit for several years. Last year, a £1.5 billion black hole was discovered in the bank’s balance sheet, leading to a rescue deal that saw lenders take a 70% stake. The bank is now seeking an additional £400 million.
The report is expected to say that the seeds of the near collapse were sown with its takeover of Britannia Building Society in 2009. At the time, Britannia was struggling with a large portfolio of bad loans, which the Co-op absorbed into its own accounts.
According to the BBC, a draft copy of Sir Christopher Kelly’s report will say the organisation was “culpable” and checks made before it bought the Britannia were only “cursory”. Kelly added that the Co-op Bank board did not have “their eye on the ball” during the takeover.
Former Co-op board members are expected to challenge the report’s findings and label them as “not factually accurate”.
The report will claim there were issues with the Co-operative Group’s takeover of the supermarket Somerfield, acquired in 2009, although it is not expected to place as much emphasis on this as the Britannia takeover.
The group also announced “disastrous” losses of £2.5 billion for 2013, the worst performing year in the group’s 150-year history. The losses were blamed on recapitalising the Co-op Bank.
Lord Myner, who recently resigned from the Co-operative Group, is also conducting a review into the governance structure at the organisation. He argues that the group “clearly needs to strengthen its governance” if it is to survive and flourish.
Photo: Co-operative Group