The finance boss of the Co-operative Group has been forced to resign from the funerals-to-supermarkets group as its banking division lurches from crisis to crisis, leaving 6.5 million customers fretting over their accounts.
The Independent on Sunday can reveal that Steve Humes has paid the price for a series of disasters which, earlier this month, forced the group to deny fears that its bank would need a taxpayer bailout.
Mr Humes has been group finance chief only since 2011, but he was inexperienced in banking, having been promoted from looking after the numbers of the Co-op's food business. He is unlikely to be the only major casualty; sources said the management team is in the process of being "strengthened".
Euan Sutherland, the group's new chief executive, is looking to make a string of senior appointments. He took the helm earlier this month, just when the severity of the problems started to emerge. He is believed to be close to confirming Mr Humes's replacement already and is accelerating other management changes, planned before joining Co-op from B&Q's owner, Kingfisher.
Mr Sutherland immediately instigated a thorough review of the banking business and on Friday the Co-op announced that it was pulling out of lending to new business customers for the rest of the year.
This is a drastic move which shows just how badly Co-op Bank has been hit by its 2009 rescue of Britannia. At the time, Britannia was the country's second-biggest building society, but it brought with it hundreds of millions of pounds of toxic commercial property and home loans. In March, the Co-op Bank reported a loss of £674m for 2012.
Tough new regulations have been forced upon Britain's banks to ensure that they have enough capital on their balance sheets to be able to cope with another financial crisis. However, one estimate puts the Co-op Bank's shortfall on the Bank of England's minimum capital requirement at £1.8bn. It is likely to be forced into sales to make up that gap. There are even suggestions that the bank might have to be wound down.
Talk of crisis escalated last month when the Co-op pulled out of plans to buy 632 high-street bank branches from Lloyds. This ruined the Government's plans to help the Co-op become a major force in high-street banking and challenge the dominance of the four major lenders.
Little more than a fortnight later, the bank division boss Brian Tootell quit when Moody's slashed Co-op Bank's credit rating to junk status, arguing that it might need "external" – state – support.
The Co-op Bank's problems may mean that its new finance head will have to be vetted by the Bank of England's Prudential Regulation Authority. The regulator is also likely to make sure the approval process is completed quickly. An industry source said: "The departure of a group finance director is quite high profile. This is an important first step to creating a strengthened management team." Spokeswomen for the Bank of England and the Co-op both declined to comment.Reuse content