Richardson was called to give testimony before the Treasury Select Committee yesterday on the merger of the Co-op and Britannia, which he led. He (not surprisingly) said there had been ‘no issue’ with its loan books, which have subsequently been blamed for impairment losses of £469m in its 2012 accounts, £351m of which came from its ‘non-core’ loans.
The bank has now asked bondholders to swap their debt for shares as part of a ‘bail-in’ to fill the £1.5bn capital shortfall which resulted from the deal.
But Richardson said new regulatory requirements which require banks to hold more capital were to blame for the shortfall - as were actions by his successors. He said he had warned board members that trying to restructure the bank at the same time as trying to buy 631 Lloyds branches wasn’t going to work, but they hadn’t listened.
‘It was my judgement that putting all these projects together was going to cause a disaster,’ he protested.
To be fair, his argument does ring true to a certain extent - after all, the hole was only discovered this year, way after Richardson’s 2011 departure. Then again, it could just as easily have been hidden by clever accounting.
It sounds like the Treasury Select Committee is planning to recall Richardson so he can explain more about why Co-op gave up on its bid for the Lloyds branches. Until then, he will have to endure the ire of the Bank of England and its new ‘cool’ governor, Mark Carney.
See below for Richardson’s testimony in full.