Politicians will grill Antonio Horta-Osorio

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BOSSES at Lloyds Banking Group face a grilling by politicians this week as the failure of a deal to sell branches to the Co-operative Bank turns increasingly toxic.

Antonio Horta-Osorio and outgoing chairman Sir Win Bischoff will face the Treasury select committee on Tuesday when questions will be raised over the level of government interference in the deal.

Fingers are pointing at Business Secretary Vince Cable, who is thought to have pressed Lloyds to choose the Co-op instead of the City-backed investment group, NBNK. This was despite a number of delays and increased concerns that the Co-op was both ill-equipped and insufficiently funded to take on 632 branches – fears which have since been realised.

Following the collapse of the EU-mandated deal in April, it emerged that the Co-op could have as much as a £1 billion “black hole” and may require a government bail out, which the bank has denied.

The bank has sold its fund management and life insurance businesses and a new management has moved in. But it is still thought that small investors who hold Co-op Bank bonds and preference shares may be forced to take a “haircut” – perhaps up to 30 per cent – as part of any required capital reconstruction.

Andrew Tyrie MP, head of the committee, has said: “We will want to know how the Co-operative Bank’s bid was allowed to progress to such an advanced stage, why it collapsed and what will now happen to these branches and their customers.”

The Co-op Group’s new chief executive, Euan Sutherland, recently appointed former HSBC executive Niall Booker as chief executive.

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