Building societies that retained their traditional mutual approach have remained secure through the financial crisis, former Co-operative Bank chief executive David Anderson has said.
Responding to a question by Labour MP Pat McFadden on the Treasury select committee on Tuesday, Mr Anderson admitted that organisations that maintained the low-risk mutual business model had avoided the calamity that befell the Co-op Bank.
However he also rejected the notion that the bank had moved away from its roots when it merged with the Britannia, and later sought to expand with the failed bid to buy 632 Lloyds Banking Group branches.
Mr Anderson instead blamed the bank’s near-collapse on a combination of payment protection insurance provision, a failed IT project, and “management stretch”. He claimed that the hundreds of millions of pounds of impaired debt emanating from the Britannia loan book would not have brought the bank down on its own.
He added that due diligence ahead of the merger did not report any signs of impairment, while bank executives met regularly with senior regulators at the FSA in the run-up to the merger, including Clive Adamson, now the FCA’s director of supervision.
Mr Anderson said: “The FSA did not impose any conditions regarding the merger. Our analysis showed that the combined entity was safer and more profitable.”
His comments followed a troubled few days for the bank, as former chairman Paul Flowers was exposed by a national newspaper for allegedly buying cocaine and methamphetamine, just days after giving evidence to the committee last week.
The scandal led to the resignation on 19 November of the Co-operative Group’s chairman Len Wardle, and the launch of an internal investigation.
Mr Flowers had been criticised by MPs on his lack of experience and knowledge of fundamental information about the bank. His appointment as a non-executive director of the bank in 2009 was approved by the FSA.
A spokesman for the FCA said Mr Flowers had “a strong CV at the time” of his appointment, before adding that the regulator supported the tougher senior persons regime recommend by the parliamentary commission on banking standards.