In a Treasury Select Committee session, partners from KPMG told MPs that the Co-op initially asked the accountancy firm to examine this part of the business in detail before the 2009 takeover, it was blocked by Britannia and the matter ended there.
Andrew Walker, a partner with KPMG, told the Committee that Britannia told him it “did not have the capability to have people coming in to the premises” and had “confidentiality and sensitivity issues” about handing over the details.
The corporate loan book is responsible for most of the £550 m Britannia-related losses that the Co-op reported this year.
KPMG did warn the Co-op about growing impairments in other parts of Britannia’s loan book and recommended further investigation into Britannia’s corporate loans, Walker said.
Next, the Co-op did its own due diligence on Britannia’s corporate loans. The Co-op’s management in general seemed competent and “asked the right questions”, Walker said.
KPMG, which has been the Co-op’s auditor for the past 30 years, received £1.3m for its due diligence work.
The Co-op also employed JP Morgan Chase as its financial adviser for the Britannia deal, for which the bank earned £7m for its “fairness opinion” on the deal. But ultimately, he said it was for the Co-op’s board to make a “commercial judgment.”
The Financial Conduct Authority and the Financial Reporting Council continue to investigate whether the bank’s 2012 accounts were accurate.
Meanwhile, a group of investors in NBNK, the shell company that lost out to the Co-op in the auction of 632 branches by Lloyds, is considering legal action on the basis it may not have had fair treatment if the government interfered.
NBNK reportedly spent about £30m of the £50m it raised from institutions pursuing the branches.