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Ex-Co-op Group boss says bank move 'a tragedy' Ex-Co-op Group boss says bank move 'a tragedy'
(about 7 hours later)
The former chief executive of the Co-op Group has said the mutual group's loss of overall control of the Co-op Bank is "a tragedy".The former chief executive of the Co-op Group has said the mutual group's loss of overall control of the Co-op Bank is "a tragedy".
However, Peter Marks, who left the group this year, said it could also be seen as a "good thing".However, Peter Marks, who left the group this year, said it could also be seen as a "good thing".
"It will force the Co-op to focus on less businesses and not stretch its capital in the way that it has been," he added."It will force the Co-op to focus on less businesses and not stretch its capital in the way that it has been," he added.
Mr Marks was being questioned by the Treasury Committee of MPs.Mr Marks was being questioned by the Treasury Committee of MPs.
The hearing was over the purchase of 632 Lloyds bank branches, which Co-op Bank pulled out of in April.The hearing was over the purchase of 632 Lloyds bank branches, which Co-op Bank pulled out of in April.
On Monday, the Co-op Group said a restructuring of its rescue deal for Co-op Bank, which will provide it with extra capital, meant it would end up holding just a 30% stake in the bank. Under its original plan it would have held a 70% stake.
'Great opportunity''Great opportunity'
On Monday, the Co-op Group said a restructuring of its rescue deal for Co-op Bank, which will provide it with extra capital, meant it would end up holding just a 30% stake in the bank. Under its original plan it would have held a 70% stake.
"How many businesses try to be major bank, major pharmacy, major food retailer, major funeral director?" asked Mr Marks."How many businesses try to be major bank, major pharmacy, major food retailer, major funeral director?" asked Mr Marks.
He said he had warned that the Co-op Group should focus on fewer businesses, but the group's structure meant that he did not have the power to change this during his six years at the helm.He said he had warned that the Co-op Group should focus on fewer businesses, but the group's structure meant that he did not have the power to change this during his six years at the helm.
"Being a chief executive of a co-operative is very different to being a chief executive of a PLC. I don't believe I could have changed the governance structure," he said."Being a chief executive of a co-operative is very different to being a chief executive of a PLC. I don't believe I could have changed the governance structure," he said.
However, Mr Marks said the plan to buy the bank branches from Lloyds had offered a "great opportunity".However, Mr Marks said the plan to buy the bank branches from Lloyds had offered a "great opportunity".
'Shortcomings'
"The bank was sub-scale, it needed to build scale to compete and survive. Verde [the Lloyds branches] created a great opportunity to do that and bring in significant capital and a high quality chief executive," he said."The bank was sub-scale, it needed to build scale to compete and survive. Verde [the Lloyds branches] created a great opportunity to do that and bring in significant capital and a high quality chief executive," he said.
Speaking about the hearing, the chairman of the Treasury Committee, Andrew Tyrie, criticised the former management for its conduct, saying: "Being owned by a mutual, the Co-op Bank differed from most of its competitors. But on today's evidence, its shortcomings did not."
"A lack of personal accountability at senior levels, ineffective corporate governance and insufficient experience and expertise among those taking the decisions. This has become a familiar story."
The Co-op Bank's financial problems came to light after the bank pulled out of the deal to buy Lloyds' branches.The Co-op Bank's financial problems came to light after the bank pulled out of the deal to buy Lloyds' branches.
In June, the Co-op announced it had reached an agreement with the bank regulator, the Prudential Regulation Authority, to plug a £1.5bn capital hole in its balance sheet.In June, the Co-op announced it had reached an agreement with the bank regulator, the Prudential Regulation Authority, to plug a £1.5bn capital hole in its balance sheet.
This would have seen Co-op Group put in £1bn of capital itself, with £500m coming from bondholders and owners of preference shares.This would have seen Co-op Group put in £1bn of capital itself, with £500m coming from bondholders and owners of preference shares.
The bank would then have been floated, with Co-op Group holding a 70% share.The bank would then have been floated, with Co-op Group holding a 70% share.
However, the bank's creditors, led by US hedge funds, rejected the plan.However, the bank's creditors, led by US hedge funds, rejected the plan.