Co-operative Group launches independent investigation into Bank

An independent inquiry into issues that led to a £1.5 billion capital hole at the Co-operative Bank is set to take place from September.

The Co-operative Group has announced the review will be led by Sir Christopher Kelly, chair of the King’s Fund and the Responsible Gambling Strategy Board. He is set to work on average two days a week from September until the investigation is completed, which is expected to be spring 2014.

Sir Christopher, who previously chaired the Government’s Committee on Standards in Public Life, has been commissioned by the new executive teams at the Group and the Bank, together with the Boards of both organisations, on behalf of the Group’s members.

It will look at the decision to merge the Co-operative Bank with the Britannia Building Society in 2009 and the proposed acquisition of the Verde assets of Lloyds Banking Group. It will include an analysis of strategic decision making, management structures, culture, governance and accounting practices and aspects of the role of the Bank auditors.

This review will assist in identifying lessons to be learned to strengthen not only the Bank and the Group, but the co-operative business model generally. The intention is to present the findings to members at The Group’s annual general meeting in May 2014.

Euan Sutherland, Chief Executive of the Co-operative Group, said: “We have developed and announced a comprehensive solution to meet the capital requirements of our Bank, bringing stability to a business that is loved by its customers and members. As we move forward with implementing the detail of this plan, it is important to learn from the past. To ensure that we can do that, we are today announcing the launch of an independent review which will take a detailed and forensic look at all the relevant events and issues.

“We are delighted that Sir Christopher has agreed to chair this review. His background means he is ideally placed both to work through the events that led to the current issues in our Bank and to recommend any changes that need to be made to our ways of working.”

Sir Christopher Kelly said: “I am pleased to be taking up this important role. The management teams and Boards at the Co-operative Group and The Co-operative Bank are determined to find out what went wrong and are giving me and my team all the support and facilities I need to run a detailed and thorough, fully independent review. I look forward to helping these important businesses and the wider co-operative movement learn the lessons to take into the future.”

Sir Christopher has been asked to look into the following areas:

• To investigate the robustness and timeliness of the Board's and the management's strategic decisions which ultimately led to the need to adopt a Capital Action Plan by the
Co-operative Bank to address its £1.5bn capital shortfall; 

• To look at the management structure and culture in which those decisions were taken; lines of accountability which governed those decisions; and the processes which led to them;

• To identify lessons which can be learnt to strengthen the Co-operative Bank and the wider Co-operative Group, and the co-operative business model generally;

• To review the financial accounting practices of the Bank, the representations made by management to the independent auditors regarding these practices and the role of the independent auditors in reporting to the Audit Committee of the Bank and giving an opinion on its financial statements;

• To publish the findings of its review to members, colleagues and other key stakeholders