THE Co-operative Group’s bid to snap up 600-plus branches from Lloyds Banking Group may be stymied until at least June because of rising regulatory concerns, sources say.
The Financial Services Authority (FSA) is understood to believe the parent board of the Co-op, which also includes food and other retail businesses, does not have the expertise to run what would be a much larger bank.
Financial services contributes about £2 billion, or 15 per cent, to the Co-op’s group revenues of £13 billion. But, if it acquired the Lloyds branches, then the Co-op’s banking network would triple from about 340 outlets to almost 1,000, and the financial services slice of Co-op revenues would leap to 40 per cent.
The FSA is said to be particularly concerned that there is no chief risk officer on the mutually‑owned Co-op’s group board, which is chosen from customers, otherwise known as “members”. Currently these board members include a Methodist minister, a plasterer and a nurse.
The Co-op was named as Lloyds’s preferred bidder for the branches before Christmas, the divestment having been ordered before the end of 2013 by the European Commission in return for the bank’s taxpayer bail-out.
The initial aim was for Lloyds to provide specific details of the sale by the end of this month, although group chief executive Antonio Horta‑Osorio has kept the possibility of a flotation of the branches on the table as a possible alternative.
It is understood the Co-op – which took over the Britannia building society in 2009 – has told the FSA it has strong financial expertise on its subsidiary banking board, including David Davies, chairman of Sun Life Assurance, former Standard Life Bank boss Anne Gunther and Merlyn Lowther, former chief cashier of the Bank of England.
The FSA, the Co-op and Lloyds would not comment yesterday.
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