Prudential Regulation Authority chief executive Andrew Bailey wrote to the Treasury Select Committee setting out his view on the Co-op’s current financial troubles after it was contested by the mutual’s former boss, Neville Richardson.

The loan losses were not ‘the sum of the Co-op Bank’s problems’, Bailey acknowledged, but could lead to further impairment.

He told MPs:

“The former Britannia assets were those on the bank’s balance sheet that were most vulnerable to further stress.”

More than 75% of non-core loan loss impairments in 2012 and roughly 85-90% of those in the first half of 2013 related to former Britannia loans, he said. In total, this represented more than half of the bank’s total loan losses over the past eighteen months.

The Financial Services Authority raised concerns about the Co-op Bank’s disastrous bid for Lloyds branches at the outset, he added.

Bailey’s letter follows a promise by MPs to investigate a ‘yawning gulf’ in the evidence of the regulators and that of former Co-op Bank chief executive Neville Richardson.

Richardson, who was also the Britannia Building Society’s chief executive before its merger with the Co-op, argued the mutual’s financial troubles were due to an overambitious strategy rather than toxic loans.

He disputed the conclusions of Prudential Regulation Authority chief Andrew Bailey that the state of the Britannia loan book was worrying, describing it instead as ‘quite normal’.

In his letter, Bailey said he intended to provide the committee with information and not to criticise Richardson.