* Richardson says deal created unacceptable risk
* Richardson says Britannia not to blame for Co-op problems
* Regulator says strongly disagrees with parts of evidence
* MPs investigating demise of branch purchase
By Matt Scuffham
LONDON, Sept 4 (Reuters) - The former boss of theCo-operative Bank said he opposed plans to buy 630branches from Lloyds Banking Group and stepped down in2011 because the board of its parent, the Co-op Group, failed to heed his warnings.
Co-op Bank pulled out of the 750 million pound ($1.2billion) deal in April following nearly two years ofnegotiations amid concerns over its capital position. Britain'sfinancial regulator has subsequently said it must raise 1.5billion pounds to plug a hole in its finances.
In written evidence to British lawmakers, Neville Richardsonsaid Co-op had too much on its plate integrating the BritanniaBuilding Society, which it purchased in 2009, and a further dealwould have created "unacceptable risk".
"I had expressed my grave concerns and, as it was clear tome that my experienced view was not going to be acted on, myposition became untenable and we mutually agreed that I wouldleave," he told the Treasury Select Committee, which isexamining why the deal collapsed.
In separate evidence, Co-op said it had not been set anexplicit date by the regulator to reach a 3 percent leverageratio target. Co-op Group's new chief executive Euan Sutherlandis working to convince bondholders to approve a lifesavingfunding proposal to fill the bank's 1.5 billion capital gap.
Under the plan, Co-op Group will provide 1 billion pounds -half from disposals and restructuring and half from bank loans.It hopes to fund another 500 million from writing down the valueof its bonds.
Richardson also denied that bad loans acquired through thebank's purchase of Britannia, where he was once chief executive,were the main reason for the Co-op's problems, a view expressedto the Treasury Select Committee by regulator Andrew Bailey.
Richardson said Britannia was a "strong organisation" and hehad "no idea why he (Bailey) would say that given the figures Ihave in front of me".
The Bank of England said in response: "We strongly disagreewith Neville Richardson's view regarding the Britannia loan booksituation. The evidence Andrew Bailey gave to the TSC wascorrect."
Co-op's 2012 accounts showed impairment losses of 469million pounds, including 351 million pounds of impairments fromits non-core business. Co-op said the bulk of its latest badloans stemmed from Britannia's corporate real estate loan book.
Richardson said Bailey informed Co-op's board of hismisgivings about the Lloyds deal, code named "Project Verde", ata dinner in July 2011 and suggested Co-op link up with apartner, possibly Rabobank.
Richardson said he had expressed his owns concerns over theplan to group chief executive Peter Marks and chairman LenWardle, and stepped down when it became clear they would pursuethe deal.
Richardson said he had subsequently been vindicated andsuggested the Verde deal would have had disastrous consequenceshad it proceeded.
"What kind of inquiry would the committee be undertaking nowif the deal (Verde) had gone ahead and then collapsed, withconsequences that could well have been a replay of Northern Rockand the institutional crises that crippled the global financialsystem in late 2008," he said.
Richardson said the Verde negotiations contributed toCo-op's management losing focus on the integration of Britanniaand distracted them from running the rest of the bank.
Lloyds (LLOY)