Co-op’s Sutherland orders £1.5bn shortfall probe
The mutual said it would shortly unveil a senior independent figure to lead the inquiry into its troubled acquisition of Britannia Building Society in 2009, and its abortive takeover of more than 600 Lloyds bank branches earlier this year.
Last month the Co-op Group disclosed plans to plug the shortfall by forcing bondholders to take a loss, or “haircut”, on their investment.
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Hide AdThey include many small private investors who will be offered shares instead in a stock market listing of the Co-op Bank. Other businesses in the organisation, from funerals to groceries, will remain mutual.
New group chief executive Euan Sutherland, who succeeded Peter Marks two months ago, commissioned the inquiry, which will report to the annual general meeting next May.
Analysts say the shortfall in the banking arm’s capital buffers mainly stems from commercial property loans acquired through the merger with Britannia.
The building society’s sour loans formed the lion’s share of nearly £470 million of Co-op bad debt writedowns in 2012, which sent the banking arm £673.7m into the red.
Concerns over the Co-op Bank’s finances came to a head in May after credit ratings agency Moody’s downgraded its debt to “junk” status, just weeks after it pulled out of the deal to buy the Lloyds branches.
Former HSBC executive Niall Booker has been appointed to run the banking arm, which has also ceased new business lending, while the group’s insurance business is up for sale.