Co-op deputy opposed purchase of Lloyds

The Co-operative Bank’s former Deputy Chairman has revealed that he quit the Co-op’s board in early 2012 over its attempts to purchase 631 branches of the Lloyds Banking Group.

During an appearance before parliament’s Treasury Select Committee, Rodney Baker-Bates stated that Co-op’s planned purchase of the banks – which Lloyds had been instructed to sell by European regulators – was a “giant step to far.”

Codenamed ‘Verde’, the plan was part of a master project to create an enlarged bank which could be a bigger competitor on the high street.

However, Baker-Bates stated he was concerned over Co-op’s “capital and competence” to compete in supermarkets and banking.

Baker-Bates also said that at 22 people, the board was too large, and held too many Co-operative members who had no knowledge of banking.

He told the committee he quit because he “failed to win the argument.”

The committee has been assembled as an independent investigation into the near-demise of the bank, and whether its decision to purchase the Lloyds bank featured any undue political interference.

Collapsed deal

Despite of Baker-Bates’s departure, the planned purchase of the banks collapsed anyway in April 2013; when a GBP 1.5 million capital shortfall was exposed by the Bank of England.

The Co-op was then bailed out by bondholders – including US hedge funds – which now own 70% of the bank against the Co-op Group’s 30% ownership.

Problems were then exasperated by the much-publicised drugs scandal surrounding then-Chairman Paul Flowers.

During the committee hearing, Baker-Bates also revealed he had been a candidate for the Chairman role, before it was offered to Flowers.

When Baker-Bates was asked if the bank may have continued in its prior form if he had taken the role of chairman, he answered: “Yes. I think it would … That may be arrogant”.

Baker-Bates and David Davies – a second Deputy Chairman – had been brought on by Co-op in part to mind Flowers, who had no banking experience.

Davies told the committee he had also opposed the Lloyds purchase, after he became aware Lloyds had misgivings over the proposed arrangement.