Co-Op Bank: RIP

The real truth is out there somewhere, buried where only those in the know can identify; what we do know, however, is that, so far, there are more questions than answers.

In his evidence to the Treasury select committee, Neville Richardson, former head of Britannia Building Society who became head of the Co-op Bank after the merger, said the toxic debt that has ended up on the Co-op Bank’s books had nothing to do with the building society.

Now Andrew Bailey, head of the Prudential Regulatory Authority, has revealed that the Britannia Building Society’s loan book was the ‘key factor’ leading to the debt-ridden Co-op Bank problems.

If this is so, then it once again raises regulatory and supervisory questions about both the FSA, which preceded the Financial Conduct Authority, and the Prudential Regulatory Authority. This needs to be explained.

Given the global financial mess of the last five to six years, given the awful incompetence that led to the collapse of Northern Rock, how then do we explain the FSA taking its eyes off the ball, especially at a time when it was supposed to be carrying out due diligence over the Co-op Bank/Britannia Building Society merger?

We need to get to the root and branch of this cock-up with a detailed forensic analysis not seen since the 2008 banking crisis.

There must also be a demand to review any honours given to individuals for services to financial services, who were at the time in a position of influence with the FSA, PRA or any other institution which would have been part of the due diligence process. The bottom line, as we have said before, is that we should allow the Co-op Bank to die as natural and dignified a death as possible.

It does not hold very much for its account holders, it is not systemically important and it will be a disgrace to allow a small bank, which survives on sentiment, to muddy the entire banking system again.