One of the architects of the Co-operative Bank’s disastrous merger with Britannia Building Society this morning insisted that that it was “the right thing to do”.
Former Co-operative Financial Services boss David Anderson spoke after Conservative Andrea Leadsom accused him of embarking on the deal at a “bizarre” time at the Treasury Select Committee.
The merger was announced in 2008, during the heart of the financial crisis. Mr Anderson then stepped down in favour of Britannia’s boss Neville Richardson.
But he said: “At that point both businesses were doing quite well,” he said. “We were the clearing bank for Northern Rock. It (the way loans were rapidly going bad and the banking crisis) was a constant source of discussion.”
Mr Anderson appeared before MPs in the midst of revelations that the stricken bank’s chairman Paul Flowers had been caught on film buying drugs. This morning Co-operative Group chairman Len Wardle quit with immediate effect as result. He had been planning to go in May.
Co-op has surrendered majority ownership of the bank to bondholders after regulators said it had a £1.5bn black hole in its accounts.
Asked if its near collapse was “inevitable” Mr Anderson said: “I’ve agonised over that. I believe the businesses together needn't have led to the difficulties, they could have been managed in a successful way. They would have faced challenges alone.
“For some considerable time afterwards this didn't look like a daft thing to do. Clearly it hasn’t turned out as we'll as we would have wanted,” he said.
He also defended the work of the bank’s advisors - including KPMG - which did due diligence on Britannia and received “hundreds of thousands, not millions” in fees.
“I honestly believe they did the job we could have expected them to do at the time. It was clear to use that there were some parts of that (Britannia’s) loan book that were appraised differently to the way we would have appraised them. We evaluated those as acceptable.”
Mr Anderson confirmed Mr Richard’s claim that Co-op approached Britiannia about the merger.