UK regulator probes Lloyds chief’s evidence on branch sales

February 12, 2014 - 7:38:40 am
LONDON: One of Britain’s senior financial regulators said he was surprised that the chairman of Lloyds Bank did not know of concerns raised in December 2011 about a planned sale of Lloyds’ branches to the Co-op Bank. 

Andrew Bailey told parliament’s Treasury Select Committee yesterday that the Co-op had informed Lloyds in December 2011 of the regulator’s concerns about the sale. Lloyds executives had told the committee last July they were not aware of a problem with the Co-op’s capital strength until a year later.

Bailey, the Bank of England’s deputy governor for financial stability, cited a letter he sent to Co-op Bank’s Chairman Paul Flowers in December 2011, which questioned whether Co-op had a “feasible and sustainable capital plan”. Bailey said he had instructed Co-op executives to inform Lloyds of his concerns and had evidence that they had done so. “I have to say to you what was a surprise in your hearing was that (Lloyds chairman) Win Bischoff didn’t know. When I heard about your hearing I said ‘well that’s odd’ and that’s obviously an issue within Lloyds,” Bailey told the committee.

Lloyds declined to comment. Lloyds, 33 percent-owned by the government, was ordered to sell 631 branches by European regulators as a condition of its £20bn bailout following the 2008 financial crisis. The committee is examining whether there was undue political interference in the sale process. Lloyds’ decision to sell the branches to the Co-op had support among lawmakers within the Conservative-led coalition government, which is committed to supporting customer-owned lenders. The deal was supposed to create an alternative to Britain’s established banks but collapsed last April. Three months later, a £1.5bn capital shortfall was uncovered at Co-op Bank, which subsequently fell under the control of bondholders including US hedge funds. Reuters