Regulator v Co-op ex-boss: not a 'vendetta'

 
Co-op Bank branch Did Britannia cause the Co-op Bank's woes?

I understand that Andrew Bailey, chief executive of the Prudential Regulation Authority, has written to the Treasury Select Committee, responding to claims by the former boss of Co-op Bank that he wrongly characterised the source of Co-op Bank's woes.

Neville Richardson told MPs on the select committee that Mr Bailey was mistaken when he said that bad lending by Britannia Building Society - which Mr Richardson previously ran and which merged with Co-op Bank in 2009 - was the main reason why Co-op Bank now needs to be rescued (see here).

Strikingly, Mr Bailey has chosen to respond more or less straight away.

I have learned that he has written a letter to the chairman of the Treasury Select Committee, Andrew Tyrie, saying that he has no wish to conduct a "vendetta" against Mr Richardson (an interesting choice of words), but he then sets out numbers on Co-op Bank's losses which he thinks prove his case.

Here are the relevant stats, according to Mr Bailey.

In the 18 months to the middle of 2013, Co-op Bank incurred losses on its loans of £970m (a short billion pounds - ouch), comprising £288m of losses on core loans, and £682m on non-core loans (or loans no longer regarded as central to what Co-op Bank does).

Of these, 75% of the non-core loan losses stemmed from the Britannia book in 2012, and 85-90% of these losses in 2013 were a Britannia vintage.

Which is why Mr Bailey feels confident in saying that more than half the loan losses over the past 18 months came from Britannia.

To be clear, loan losses weren't the only source of Co-op Bank's problems. There were also, for example, the expensive write-offs of an IT system.

But Mr Bailey feels confident in his statement that Britannia was a significant cause of the hole at Co-op Bank.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
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    Comment number 65.

    If it isn't a vendetta how come the big banks with standard stock market ownership structures and MUCH WORSE debt/liquidity ratios etc are not being pursued with even remotely the same vigour........?????????

  • rate this
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    Comment number 64.

    #60 Agreed, but the loans are non-core/higher risk - apparently performing well (until recently?!). No disputing higher provisions required (by all banks) to off-set potential loan losses.

    My point is more as to how the story is framed - 'regulator v ex-boss' when the 2 sides agree.

    If not Britannia (as reported), who/what is to blame for the further £1bn losses?

    More investigation please RP!

  • rate this
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    Comment number 63.

    #62 totally agree with you there , also menat HMG borrowing costs were low and fitted straingth into brown spend spend spend tax tax tax policy

    70,000 estate agents too, agree , in the last year , but shows that a big problem is coming our way, as if we did not know

  • rate this
    +1

    Comment number 62.

    60.IR35_SURVIVOR "ALL part of the DEBT fuelled boom of pre-2008"

    And whose responsibility was that? The idiots at the Bank of England who set rates far too low for the whole of the preceding decade.

    (They justified this on the basis of imported Chinese deflation in the shops keeping inflation artificially low. Their whole economic philosophy of regulation is CORRUPT and ROTTEN and remains so.)

  • rate this
    0

    Comment number 61.

    Apparently

    in the new jobs created this month are/were 70,000 estate agents!

    The fools at the BoE headed by the twit at the top seem totally intent on re-inflating the housing bubble. (Which as everyone knows will presage a disaster.)

    Anything Caney says - the exact opposite happens - he MUST go NOW! Before he completely destroys the UK economy.

 

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