Sir Christopher Kelly's report set to flay board over Co-op's near-collapse

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The Independent Online

An independent report into how The Co-operative Bank almost collapsed with a £1.5bn hole in its balance sheet is set to be scathing about former executives and board members.

Sir Christopher Kelly's report is due next week but a draft version says the seeds of the near-collapse lay with its takeover of Britannia Building Society in 2009, according to the BBC.

The Co-op Group, which commissioned the independent report last July, declined to comment on the findings, which will be published ahead of the mutual's annual meeting on 7 May.

It is understood the group has not seen the draft, but individuals named in it have. These are likely to include Neville Richardson, the former chief executive of Britannia and then Co-op Bank; Peter Marks, the former chairman of Co-op Group; and Barry Tootell, a former chief executive of the bank who led the abortive takeover of 630 Lloyds branches, known as Project Verde.

The report is also said to be highly critical of Co-op Bank's governance and could single out board members, including the former chairman, the Reverend Paul Flowers, who has been charged with drug offences.

It will also mention the £1.6bn takeover of rival supermarket chain Somerfield in 2009.

Although this was not specifically in Sir Christopher's brief, he is expected to say it took up much management attention which should have been spent on the bank and its Britannia deal. Last week, Richard Pennycook, Co-op Group interim chief executive, revealed it will have got rid of 60 per cent of the stores it bought by 2016.

Sir Christopher, who is a former career civil servant and chairman of the Committee on Standards in Public Life, began his review last September.

The report is expected to say that the Co-op's due diligence over Britannia was "extremely cursory" and that it was "culpable".

This is likely to be challenged by some of those named in the report, who could claim that it is factually inaccurate.

The collapse of Project Verde led to the discovery of the £1.5bn gap in Co-op Bank's balance sheet.

This sparked its bailout, mainly by US hedge funds, which owned its debt and swapped it for a 70 per cent stake in the bank.