Osborne denies ‘undue pressure’ in Lloyds deal

Osborne: No 'undue pressuere' over Lloyds branch sale to Co-op Bank. Picture: Getty
Osborne: No 'undue pressuere' over Lloyds branch sale to Co-op Bank. Picture: Getty
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Chancellor George Osborne has denied claims the Treasury interfered in Lloyds Banking Group’s ill-fated deal to sell more than 600 bank branches to the Co-operative Group.

He told MPs on the Treasury select committee that the UK government did not put “undue pressure” on the Co-op to buy the branches.

His comments follow allegations of Westminster interference made by Paul Flowers, the Co-op Bank’s disgraced former chairman, who claimed last month that politicians pressured the bank into the Lloyds deal, known as Project Verde.

Osborne said: “We were always very clear both that the commercial decision on the Verde sale was a matter for Lloyds and that the then-regulator the FSA (Financial Services Authority) should decide whether to allow the sale to proceed or not.”

He added: “At all times, both ministers and officials made clear to the FSA that the regulatory decision on whether to allow the Co-op/Verde deal to proceed – and, in particular, the prudential judgment on whether there were financial stability concerns from doing so – was a matter wholly and solely for it.

“At no point did the Treasury seek to interfere in those judgments.”

Osborne confirmed that regulatory stress tests revealed balance sheet concerns surrounding the Co-op Bank in the second half of 2012, but added the Treasury was only made aware of the issues in early 2013, just before the Co-op withdrew from the deal and a £1.5 billion black hole in its finances drove it to the brink of collapse.