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Former Co-op boss refuses to take blame for bank meltdown Former Co-op boss refuses to take blame for bank meltdown
(about 5 hours later)
The former boss of the Co-operative Group has repeatedly refused to take personal responsibility for the crisis at the mutual's banking arm which has fallen under the control of hedge funds. The Co-operative Group promised a radical overhaul of its boardroom on Tuesday just hours after the former boss of the grocery and funeral care business deflected responsibility for the crisis at its bank which has fallen under the control of hedge funds.
During a heated appearance before the Treasury select committee of MPs – at which Peter Marks was accused of "selective amnesia", being "gung-ho" and "out of his depth", and in "complete denial" - the former boss described the fate of the bank as a "tragedy". Peter Marks was accused of "selective amnesia", being "gung-ho", "out of his depth", and in "complete denial" during a heated appearance before the Treasury select committee of MPs at the former boss of the UK's largest mutual, described the fate of the bank as a "tragedy". Marks's appearance came as the Co-op Group's chairman, Len Wardle, announced that he is quitting to clear the way for a successor to be appointed from outside the mutual movement.
In a blow to his successors who claim the Co-op bank can maintain its ethical stance, Marks said he doubted this could be the case. "It's not a Co-op is it?," said Marks who was greeted with incredulity by MPs as he refused to take personal responsibility for the bank's problems. The decision by Len Wardle to step aside from next May was said to not be related to Marks' appearance before MPs but is significant, signalling a shift from the traditional boardroom composition of the Co-op and the potential for cultural change. The board is made up of 20 members of the movement and Wardle, a former university fellow, has been chairman since 2007.
"Hedge funds exist to maximise profits … to be ethical you can't do that," Marks told MP Pat McFadden. Mark's appearance before MPs came 24 hours after the Co-op Group had to admit it was ceding control of its bank – for which Marks had once harboured huge ambitions - to hedge funds. The Co-op -– which spans funeral homes, grocers and pharmacies - will be left with just 30% ownership after the deal with hedge funds to plug a £1.5bn capital gap in the bank.
The Co-op Group, which has eight businesses spanning grocers, pharmacies and funeral homes, on Monday admitted it was ceding control of the bank after pressure from hedge funds. The Manchester-based group will end up with just 30% of the bank after a deal to plug the £1.5bn capital shortfall identified by the Bank of England. Marks, who left in May after 45 years, was greeted with incredulity by MPs as he repeatedly refused to take personal responsibility for the bank's problems. He said Co-op was not "Peter Marks plc" or a "dictatorship" and described how his job was not like running a plc as he did not have a seat on the Co-op Group board and could not have changed the way the mutual, founded in 1844, was run.
While he doubted the bank could still be seen as ethical after the intervention of hedge funds, the deal could be a "good thing" for the wider group. In a blow to his successors, he cast doubt upon their assertions that Co-op bank can maintain its ethical stance despite the involvement of hedge funds.
Marks laid the responsibility for the bank's problems on divisional bosses who led the deal to merge with the Britannia Building Society in 2008, which is now blamed for losses at the larger bank. "It's not a co-op is it?," he said
He said the architects of that deal were David Anderson, who ran the Co-op bank at the time and the Britannia boss Neville Richardson, who ran the enlarged entity before leaving in 2011. "Hedge funds are there to maximise profit, that's what their sole purpose in life is. To be truly ethical you cannot do that," Marks told Labour MP Pat McFadden.
"Should we have merged with Britannia building society? If we had a crystal ball of course we wouldn't." Marks said the intervention of the US hedge funds – Silver Point and Aurelius – could be a "good thing" for the wider Co-op Group and that he warned the Co-op Group board that they "were stretching their capital and still do".
Pressed by MPs who repeatedly asked if the deal was a disastrous error, he said: "Disastrous error is harsh. Certainly it was an error." He then annoyed the committee chairman, Andrew Tyrie, by refusing to saying how big an error. "How many businesses try to be major bank, major pharmacy, major food retailer, major funeral director?" he said.
While Marks was prepared to take shared responsibility for the problems he said: "We do all have to take some responsibility but I was not approved by the Financial Services Authority to run a bank." Marks said work by KPMG had been relied upon to agree the Britannia deal. MPs grew frustrated as his reluctance to take responsibility for the bank's merger with Britannia Building Society in 2008 –now blamed for many of the losses – and the aborted attempt to buy 632 branches from Lloyds Banking Group which collapsed in April.
Marks was a non-executive at the banking arm while running the overall group. The group expanded rapidly under his leadership, buying the Somerfield supermarket chain. "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," said Andrew Tyrie, chairman of the committee, which will take evidence next week from former bank boss Barry Tootell.
He said the problems at the bank – exposed in May this year, a month after Co-op pulled out of the Verde deal to buy 631 branches from Lloyds Banking Group – were a "tragedy". Marks said the Britannia deal had been overseen by David Anderson, who ran the Co-op bank at the time and the Britannia boss Neville Richardson, who ran the enlarged entity before leaving in 2011.
He stressed he was only a non-executive director on the bank's board. "We do all have to take some responsibility but I was not approved by the Financial Services Authority to run a bank." Marks said work by KPMG had been relied upon to agree the Britannia deal.
"I can't take responsibility for something I wasn't in full control of, which was the bank. I wasn't driving the Britannia deal but I absolutely voted for it when it was proposed," said Marks. "Should we have merged with Britannia building society? If we had a crystal ball of course we wouldn't."
Pressed by MPs who repeatedly asked if the deal was a disastrous error, Marks said: "Disastrous error is harsh. Certainly it was an error." Marks said he was "feeling very sad" and the problems at the bank were a "tragedy".
"It's a tragedy what's happened, for the group, for the movement, for me personally," Marks told MPs."It's a tragedy what's happened, for the group, for the movement, for me personally," Marks told MPs.
He spent 45 years at the Co-op, founded by the Rochdale pioneers in 1844, but said the problems that have occurred were inevitable, although he personally said he was "feeling very sad". In often confusing evidence, Marks eventually conceded that Richardson had left the bank during a "disagreement" about the capacity to buy the Lloyds branches – code-named Verde – and an internal management programme known as Unity.
He had warned the Co-op Group board – on which he did not have a seat despite his role as chief executive – that they "were stretching their capital and still do". But he surprised MPs by admitting he had not put into writing his warnings over eight business lines. He also said he had tried to persuade the board to sell the farming arm – Britain's biggest farmer.In often confusing evidence, Marks eventually conceded that Richardson had left the bank during a "disagreement" over Verde and an internal management programme known as Unity.
Marks defended the Verde deal which would have transformed the bank on the high street, agreeing that he was the "driving force". But still Marks frustrated MPs by refusing to take personal responsibility and was accused of "selective amensia" when he failed to remember a warning about Co-op's capital by Lloyds in December 2012 – four months before the deal fell apart.Marks defended the Verde deal which would have transformed the bank on the high street, agreeing that he was the "driving force". But still Marks frustrated MPs by refusing to take personal responsibility and was accused of "selective amensia" when he failed to remember a warning about Co-op's capital by Lloyds in December 2012 – four months before the deal fell apart.
At the time Marks blamed the economy for the failed deal – the capital hole was exposed two months later – and he asserted to MPs that the bank was a "victim" of the financial services crash. At the time Marks blamed the economy for the failed deal – the capital hole was exposed two months later – and told MPs that the bank was a "victim" of the financial services crash.
Asked whether there had been political interference to do the Verde deal – as has been asserted by failed bidders for the branches – Marks replied: "Not that I'm aware of."Asked whether there had been political interference to do the Verde deal – as has been asserted by failed bidders for the branches – Marks replied: "Not that I'm aware of."
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