Andrew Bailey and Lord Levene to give Co-op evidence

He has described the branch sale to Co-op as a “wild goose chase” and is likely to disclose further details of the political “interference” he feels was involved in Lloyds’ decision to choose the Co-op over NBNK.

Lord Levene is likely to be asked about a memorandum, details of which first emerged in The Sunday Telegraph , which NBNK gave to Sir Win Bischoff, the Lloyds chairman, and the Co-op, in early 2012.

The document outlined the financing risk surrounding the Co-op bid as well as the problems of executing the deal.

“With an outdated platform and problems with the Britannia integration, the Co-op will face great difficulty,” the document said.

Lord Levene wrote to the Chancellor in June 2013 asking why the Co-op was allowed to continue with the deal when it was clear to many externally that it would not go ahead.

Lord Levene is also believed to have spoken to Lord King, then governor of the Bank, who is reported to have told him the NBNK deal would fail because of “a political desire” for the Co-op to succeed.

The Verde deal, which would have seen the Co-op buy Lloyds’ 631 TSB branches, collapsed in April 2013, just six weeks before it emerged the mutual bank was suffering a £1.5bn black hole in its capital provision.

Although Mr Bailey has not appeared to face specific questions over the Verde deal, at a 2013 hearing he was asked about the Co-op by Jesse Norman, the Conservative MP.

“Did the PRA advise the Co-operative Bank to discontinue its bid for the Verde branches because of the capital shortfall that you discovered?” Mr Norman inquired.

“We never approved the Co-op bid for the Verde branches,” Mr Bailey replied, adding that towards the end of 2011 “we made it clear to them that … it was not clear to us that the Co-op Banking Group had the ability to transform itself successfully and sustainably into an organisation on the scale that would result from acquiring the Verde assets”.

Mr Bailey has also submitted written evidence, including documents insisting that the loan book of the Britannia Building Society, which merged with Co-op in 2009, was the key factor behind the latter’s downfall.

Spokesmen for the committee and the PRA declined to comment.

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