James Moore: A tale of two Co-op accounts raises some stark discrepancies

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The Independent Online

Outlook So who do you believe? Neville Richardson, the former chief executive of Co-operative Banking Group, who previously ran Britannia Building Society, tagged as the source of its problems following their merger.

He says there weren't any difficulties with Britannia's loan book when he was at the top, and that it all went wrong after he left. That and the fact the nasty old Bank of England insisted banks raise new capital based on a conservative approach to provisioning.

Or Andrew Bailey, the head of the Bank's regulatory division. He's generally viewed by bankers as something of a pain (which some might consider a back-handed compliment). But, and this is an important point, a scrupulously honourable pain.

He told the Treasury Select Committee that Britannia was a very big contributor to Co-op Bank's problems, and its need for £1.5bn of extra capital.

Andrew Tyrie, the committee's chairman, said after the hearing that there was a yawning gulf between their two accounts of what led to the Co-op's crisis, and the demise of its ill-fated attempt to take over more than 600 Lloyds branches.

From where I was sitting it's even simpler than that. One of these men was either delusional or they were being, as the late Alan Clark MP once famously put it, economical with the actualité. There's no other way to reconcile such starkly different accounts.

It is true that the Bank is being tough, and it arguably should be, over the way banks provision against bad or risky loans. This has required lots of them to raise fresh capital. It's true that loans provisioned against because they are "bad" or "risky" don't always go pop, as Mr Richardson pointed out. But they often do and as the examples of HBOS and Royal Bank of Scotland show, there is great merit in the conservative approach.

What we do know is that Co-op's recent results showed "impairment losses" of £468.7m, of which £351m was classified as "non core". That is supposed, largely, to have been brought to Co-op by Britannia.

Mr Richardson says there wasn't any problem with his loan book when he was in charge, and implied that there must have been some serious mismanagement between then and now.

It's high time we heard from the new team at Co-op, who might be able to clarify the stark discrepancy between the two sets of testimony.