A damning report into the near-collapse of the Co-operative Bank has laid the blame on executives running the business in the wake of its ill-fated merger with the Britannia building society.
Sir Christopher Kelly, author of the review, said: “This report tells a sorry story of failings in management and governance on many levels.”
The former Treasury mandarin was asked to investigate after the bank was found to have a £1.5 billion hole in its balance sheet which ultimately required a rescue by bondholders.
Today’s long-awaited report found “overwhelming” evidence that Britannia chief executive Neville Richardson, who took over as boss following the 2009 merger, failed to leave the new business “in a good position” when he departed in 2011.
It also said the culture of the bank was partly to blame, with a “willingness to accept poor performance” and a “tendency not to welcome challenge”.
The board of the wider Co-operative Group, led at the time by Peter Marks, also came in for criticism for failing properly to oversee the bank and badly letting down the group’s millions of members.
Kelly said: “The roots of the shortfall lie in a merger between the bank and the Britannia building society which should probably never have happened.
“Both organisations had problems. Bringing them together exacerbated those problems. It might have worked if the merged organisation had first class leadership. Sadly it did not.”
In response to the report, current Co-op Bank chief executive Niall Booker apologised for “past failings” and said the lender had been “working diligently” to address them.
Booker added: “It is clear from the report that there were serious failings in the past. The board will consider the implications of today’s report and, bearing in mind the various external investigations into the same past events which are still ongoing, consider what action it should take, after taking appropriate professional advice.
“There is further work to be done but customers should be in no doubt of our commitment to return to our roots as a smaller, efficient bank focused on serving individuals and small and medium-sized businesses with values and ethics at our heart.”
Co-op Bank also said today that it was appointing “big four” accountant EY as its new auditor, ending a 40-year relationship with KPMG amid a regulatory investigation into the Co-op’s past accounts in the years leading up to the end of 2012.