Competition to take over Lloyds branch ‘run in bad faith’

The deal ultimately collapsed after the discovery of a £1.5bn black hole in the mutual’s finances and Lloyds instead hived off the branches under the revived TSB brand – expected to be floated later this year.

Lord Levene, former chairman of NBNK Investments, which wanted to create a new challenger high street bank, told the Treasury Select Committee that the competition to buy the branches was run in “bad faith”.

He said that he handed the chairman of Lloyds a paper setting out “key risks” to the Co-op and the planned “Project Verde” transaction. In written evidence to MPs, he said “leading market players” believed at the time the Co-op bid would fail.

But the peer told the committee yesterday that during the bid process it had been pointed out to him that the coalition agreement contained a goal to promote the interest of mutuals.

Lord Levene, a former chairman of Lloyd’s of London, said key Government figures including Business Secretary Vince Cable were particular champions of the approach.

He said: “I think, with the benefit of hindsight, there must have been a view that if the creation of a new challenger bank would be created by a mutual, this would be another tick in the box for the goals that had been set out.

“I have no difficulty with that, provided they were done by fair means rather than foul.

“In our view, they chose to concentrate on all the positive aspects of the Co-op and none of the positive aspects of our bid.

“I would say that Lloyds were swayed by political considerations. I would say that their assessment of our bid... was not done fairly.”