UK: Chairman of Co-operative Group to stand down
- Credit: PA
The turmoil at the Co-operative Group continued today as its chairman said he was quitting and its former chief executive labelled a deal to hand control of its banking arm to US hedge funds a “tragedy”.
The customer-owned group said Len Wardle, who has been chairman since 2007, will leave in May.
It follows an appearance by Peter Marks before MPs on the Treasury Select Committee, when the former boss of the funerals-to-supermarkets group refused to take the blame for the Co-operative Bank’s demise.
The member-owned group will be left with just 30% of the ethical bank under plans to repair a £1.5 billion hole in its balance sheet, with bondholders expected to take majority control.
Mr Wardle said he had told the board in August of his plan to quit, and insisted the mutual would emerge “stronger than ever”.
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The former Labour councillor called for a new independent chairman. He said: “The Co-operative is at its best when it is reforming and I want this change to continue.”
The Co-op’s latest high-profile change follows Euan Sutherland replacing Mr Marks, former Morrisons finance director Richard Pennycook becoming the Co-op’s Group’s new finance chief and former HSBC executive Niall Booker taking the reins of the bank.
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Mr Sutherland thanked Mr Wardle for his “leadership and commitment”, after he joined the Co-op’s board in 1992.
The Co-op, which traces its roots back to 1844 with the Rochdale Pioneers, is finalising a rescue plan for its banking arm which will avoid a taxpayer bailout but cede control to owners of its bonds including US hedge funds Aurelius Capital Management and Silver Point Capital - prompting fears of a customer exodus.
News of his departure emerged hours after Mr Marks, who was group chief executive from 2007 until this May, told MPs the bank will struggle to retain its ethical ethos under its new owners. “It’s not a co-op, is it?” he said.
Mr Marks said: “Hedge funds are there to maximise profit, that’s what their sole purpose in life is. To be truly ethical you cannot do that.
“That does not mean the group cannot be ethical. Without the bank it can focus on its other businesses and be very ethical.”
Mr Marks said losing control of the bank could be a “good thing” for the mutual, by allowing the Co-op Group to tighten its focus elsewhere.
“In many ways it could be seen as a good thing because in actual fact it will force the Co-op to focus on less and not stretch its capital,” he said.
But during a testy evidence session he insisted as a non-executive director of the bank he was only partially responsible for the current situation, adding it was not “Peter Marks plc” or a “dictatorship”.
“I cannot take responsibility for something I’m not in full control of, which was the bank,” he said.
MPs, who are probing the collapse of the Co-op’s deal to buy more than 600 branches from Lloyds Banking Group ? dubbed Project Verde ? expressed incredulity at parts of his evidence.
Conservative MP David Ruffley accused him of “selective amnesia” over his failure to remember Lloyds’ warning over the Co-op’s capital strength in December 2012. “I could have been aware of it but it’s some time ago,” he said.
Labour MP John Mann said: “You and others at the group were totally out of your depth in expanding the size of the Co-op so quickly and it’s that attempt to grow so rapidly... which has led to this catastrophe.”
But Mr Marks, who started his career stacking shelves at the Co-operative, denied this.
Asked if the bank was an “innocent victim” from the financial crisis, Mr Marks said “Yes”.
He said regulators have “shifted the goalposts” on how much buffer capital the bank must hold to protect it from future crises, adding the Lloyds deal would have helped solve its capital problems.
And he said its takeover of Britannia Building Society in 2009, which has been blamed for the bank’s multimillion-pound losses, was only a mistake in “hindsight”, adding other executives were the driving force behind the merger.
“I think disastrous error is harsh but it certainly was an error,” said Mr Marks. He added the Co-op relied on its accountants KPMG for due diligence on the deal.
However, Mr Marks said he repeatedly warned the group that it was trying to do too much, citing operations including supermarkets, car sales, insurance, banking and funerals, and said there was a “degree of inevitability” about the current crisis.
“I spent my life, 45 years, working for the Co-operative. I believe in its values and it’s a tragedy what’s happened for the group, for the movement and for me personally,” he said.
The Co-op is expected to finalise details on its banking rescue plan in the coming days.
In a letter to the committee, former Co-operative Bank boss Neville Richardson admitted the loans acquired with the Britannia - which he ran before it was acquired by the Co-op in 2009 - were a “key factor” behind the bank’s woes.
Mr Richardson was asked by committee members to submit further details after providing “apparently conflicting” evidence with Prudential Regulation Authority boss Andrew Bailey.
Mr Richardson told the cross-party group of MPs in September that the Britannia loans were not solely to blame for the financial troubles at the Co-op Bank, insisting the bad debts only accounted for a third of the bank’s impairments.
But Mr Bailey wrote to the committee after his hearing insisting the Britannia assets had contributed a “significant proportion” - more than 75% - of the Co-op’s losses and were the most vulnerable to stress.
In his follow-up letter to the committee, Mr Richardson said he stands by his original evidence but said he agreed with Mr Bailey that the Britannia loans were a “significant” or “key factor”.
He also claimed that Mr Bailey based his calculations on a different total loan loss figure, adding that by using £1.6billion as the overall impairment charge meant Britannia loans did only account for around a third.