Banking: Co-operative Bank

Lord Tomlinson Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Newby]

My Lords, one of the key purposes of the Financial Services (Banking Reform) Bill is to provide, in ring-fenced retail banks, relatively risk-free places for ordinary customers to put their money. Beyond that, the key thing is that the Bill’s resolution provisions will require banks to put in place mechanisms to be activated if they got into financial difficulties, such that they would not need to come to government in those circumstances.

[Lord Tomlinson (Lab)]

Is the Minister aware that when giving evidence to the House of Commons Select Committee yesterday, the former chief executive of the Co-op Bank said that he was assured by the financial regulator about the safe state of the Britannia Building Society? The Co-op Bank takeover of the Britannia Building Society has given rise to the liquidity problems in the bank. Will he acknowledge that and inquire what the financial regulator was doing in giving that assurance?

[Lord Newby]

My Lords, I think the merger with the Britannia Building Society was one of the material causes of this problem. I cannot comment on what the regulator may have said. Generally, where banks of all sorts have sought to make large acquisitions and they have then gone wrong, the principal responsibility for due diligence rests with the management of the bank involved in the takeover. The role played by the regulator, whatever its scale, does not detract from the fact that responsibility for major corporate decisions of that kind lies primarily with management.