Comment: No Co–op Bank credit where no credit is due

That is the crux of the damning independent report into the near collapse of the bank by former Treasury official Sir Christopher Kelly.

Kelly, whose report was commissioned by the bank, says its management did not have the expertise to handle Britannia’s problems – mainly soured commercial property loans – particularly against the backdrop of major problems integrating IT  systems.

And the wider Co-operative Group board did not have the controls to rein in and mitigate the flawed systems and strategy at its banking arm.

Metaphorically, the Co-op Bank was a wayward banking kid with  an angelic mutual smile, while the Co-op Group, led by the ebullient Peter Marks, was a wishy-washy parent who pfaffed around as its child went off the rails.

One pungent line from the report, which also skewers former Co-op Bank and Britannia chief executive Neville Richardson pretty effectively, says the bank had a tendency “to seek ways of favouring short-term financial performance and capital where the bank believed the letter of accounting rules allowed it to do so, even if that was not fully within their spirit”. As the TV programme isn’t quite called, the only way wasn’t ethics.

The Co-op Bank then tried to buy some 600 branches Lloyds was offloading. But the jig was up when the regulator sought generally higher capital cushions in the British banking industry and the Co-op was found to be the little matter of £1.5 billion short.

Game over, and the Co-op Bank, with supreme irony, needed a rescue by bondholders that took majority control of the asset away from the Co-operative Group.

Kelly’s report is scathing. It tells a sorry story of failings from top to bottom of a mutual with feet of clay. The response from the Co-op parent yesterday was contrite, peppered with words such as “stark” and “sobering”.

The problem is that although the management who presided over this disaster have gone, there has been other more recent bloodletting in the boardroom – from former group chief executive Euan Sutherland to  the Crystal Methodist, arithmetically challenged Reverend Flowers to Scottish board chairman Stuart Ramsay this week.

Kelly notes that there has been an inherent resistance to change within the organisation. It says a lot that it is only yesterday that the Co-op Bank revealed it was appointing a new auditor, in Ernst & Young, ending a relationship that lasted over four decades with KPMG.

Retrenchment and reduced aspirations seems the likely order of the day now as the mutual attempts to gradually rebuild its damaged reputation.

The Co-op Group has already revealed it is selling its farms and would entertain offers for its pharmacies. Who’s to say it doesn’t pull the plug on banking at some juncture?

A minority shareholding of 30 per cent in a damaged banking brand does not seem the most attractive business strategy the world has seen.

Kelly’s report is just the latest in the litany of bad news to hit the Co-op. Truly, a slo-mo train crash.