Government accused of influencing Lloyds and Co-op deal

The failed deal between Lloyds Banking Group and the Co-op Bank is under investigation for political interference. The government has been accused of favouring the Co-op Bank in the part sale of Lloyds TSB before the deal eventually fell through. Lord Levene, who headed up a rival bid to buy the branches, said he was told by former Bank of England head Lord King that it was a political decision to back the Co-op's bid to buy 632 Lloyds bank branches which was announced in 2011.Co-op Bank backed away from its offer for the branches in April, citing a difficult economic environment and regulatory hurdles. The bank was later found to have a capital shortfall of £1.5bn.Lord Levene's bank NBNK had hoped to buy the TSB branches to enter the UK market. "Lord King advised me that we would not be the winners in this bid because a political decision had been made to favour the Co-op, and that the only way, at the 11th hour, that we could do this would be to talk directly to the politicians about this. Which we did. And they told us it wasn't true," he told the BBC.Lloyds now plans to float TSB on the London Stock Exchange with an initial sale of a stake between 30% and 50%. The lender will reduce its stake in further tranches over time.The European Commission has ruled that Lloyds must sell TSB following the government's £20bn bailout.The Commission had initially set a November 2013 deadline which was missed due to the aborted sale with the Co-op. Shares in Lloyds were up 0.86% to 75.26p at 10:39 on Monday.RD