Co-op Bank's Britannia merger was 'major cause of downfall'
Sir Christopher Kelly's damning Co-op review tells 'a sorry story of failings on a number of levels'
THE Co-operative Bank's merger with Britannia Building Society five years ago "should probably never have happened", according to a report into the Co-op crisis.
The "damning" review by former civil servant Sir Christopher Kelly has torn into the Co-op Bank's former management and board, exposing basic failures in virtually every aspect of the business, reports the Financial Times.
The Co-op commissioned the review after a £1.5bn capital shortfall was exposed in June last year. Published today, it tells "a sorry story of failings on a number of levels", says Kelly.
He describes the merger of the Co-op Bank with Britannia in August 2009 as a "major source" of its subsequent difficulties. Co-op Bank ignored the limitations of its size, talent pool and location and became "saddled with a substantial volume of assets well outside its risk appetite", it said.
Kelly added: "It might have worked if the merged organisation had received first class leadership. Sadly it did not."
The report was based on more than 130 interviews with current and former employees – although Kelly notes that Paul Flowers, the former Co-op Bank chairman, who was charged with drug possession earlier this month, refused to meet with him.
It highlighted a number of failures by the bank's executive, as well as the Co-op Banking Group Board. "Collectively, they failed to ensure that the Co-operative Bank consistently lived up to its ethical principles. In all these things they badly let down the Group's members," said Kelly.
The report said that "at no time" between the Britannia merger in 2009 and spring 2013 did the Co-op Bank have a chief executive with appropriate experience.
Kelly concluded the report with a number of lessons, such as recognising the complexities of running a bank and having the most suitable executive team. But he added that most of the lessons "are not new" and it "does no credit to those involved that they must be learnt again".