Report into Co-op Bank failure to blame governance

Sir Christopher Kelly, a former official at the Treasury, is expected to say the Co-op Bank failed last year due to a combination of woeful oversight and its disastrous merger with the Britannia Building Society.

The lender’s financial problems led to an emergency recapitalisation of the bank, with the overall Co-op Group being forced to cede control of the business to the lender’s bondholders as part of a debt-for-equity swap.

Following this deal, the Co-op Group was left with a 30pc holding in the bank, but even this stake could shrink further if the organisation is not able to find the money to take part in a second £400m capital raising by the lender announced last month.

Sir Christopher’s report will also come ahead of next month’s Co-op Group annual general meeting at which members will be asked to vote on proposals to reform the mutual’s governance.

The proposals follow a review by Lord Myners, the former City minister, who has looked at ways to improve how the Co-op as a whole is run.

Lord Myners reforms are likely to face opposition from some of the Co-op’s largest member groups and earlier this month he resigned as the mutual’s senior independent director amid signs the organisation might attempt to put off a vote on change.

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