Andrew Bailey, CEO of the Prudential Regulation Authority (PRA) said the regulator’s predecessor the FSA had never approved the Co-op’s bid for the branches which collapsed in April.
He is reported by The Telegraph as saying: “Towards the end of 2011, we made it clear to them, and I’ll use these words carefully, it was not clear to us that the Co-op Banking Group had the ability to transform itself successfully and sustainably into an organisation on a scale that would result from acquiring the asset.”
Bailey told the TSC he had made it clear the comments should be passed onto Lloyds, and has evidence to suggest his requests were complied with.
The Co-op declined to comment on whether Lloyds had been informed.
The bank is turning to bond holders to plug its £1.5bn capital shortfall, with all stakeholders being offered shares in the bank as part of a “bail-in” which will result in a stockmarket listing for the group.
Last month Sir Win Bischoff, chairman of Lloyds, told MPs that the bank had only started to have doubts about the Co-op in December 2012, and the bank has stood by the chairman’s version of events.
Paul Tucker, deputy governor of the Bank of England, told the TSC a new rule requiring banks to limit their lending based on the amount of money the hold in capital should be introduced without delay. Tucker leaves his post at the Bank later in the year.
