Verde leaves Lloyds feeling green: state-backed bank sells to Co-op So who, or what, is to blame? Look to the financial crisis, when the Government helped Lloyds to buy its teetering rival HBOS in 2008 with an injection of £17bn, before more state aid followed. The European Commission allowed the emergency acquisition only on the condition that the market "distortion" be removed through Lloyds selling off at least 600 branches, levelling the playing field for everyone else. But what no one foresaw when the November 2013 deadline for the sell off was set was just how precarious a position the European banking system would be in as the eurozone crisis rages on. The funding pressures on banks have hammered the value of the assets up for sale, while market conditions have made getting rid of the branches through an initial public offering nigh-on impossible. Meanwhile, the names in the mix to buy the branches - known as the Verde business - have thinned out from to leave the Co-op as the only serious contender. Banking sources were yesterday reminding all and sundry that rival suitor NBNK, the vehicle set up by the former Lloyd's of London chairman Lord Levene, would have paid a total of more than £1.2bn - considerably more than the £750m the Co-op might stump up. However, the obstacles to NBNK being chosen were high, with questions around its financial firepower. The Co-op, in contrast, already had a banking business and should, the hope is, prove reassuringly familiar to the Lloyds customers being transferred - who, of course, can refuse to move. Despite the Co-op was the preferred buyer, it could not afford a chunky price, so Lloyds is underwriting £350m of debt the Co-op is issuing to fund the deal, meaning that Lloyds will cover any shortfall if investors do not bite. Its branches also come with a better-looking balance sheet than that first proposed - a £24bn package balancing assets and liabilities, eliminating a huge funding gap. But while Lloyds shareholders may be disappointed, they are not calling for heads to roll - after all, who can they point the finger at? The authorities, in the UK and Europe, were not open to the option of pushing the sale deadline back, being keen to increase competition. That was the thinking hinted at by the Chancellor, as he greeted the sale, which swells the Co-op's banking arm to 10pc of the UK market, as a "step towards creating a new banking system for Britain that gives real choice to customers." Nor was Lloyds keen to drag the process out any longer. What this sale does is finally give its investors some certainty, as well as marking a step away from the sector's darkest days. Admittedly, the bank it creates looks a strange animal. The Co-op, as Britain's biggest mutual, is member-owned and even boasts a Methodist minister on its board, not your typical banking director. Mr Marks yesterday insisted the Co-op operated the "gold standard in governance," prickling at previous reports that the Financial Services Authority (FSA) had asked for a beefed-up financial presence on its board, but it is interesting to look at how the branches will be run. Within the Co-op Group will sit a business that is uniquely Lloyds. As well as helping to fund the sale, the bank is providing the management team - Lloyds executive Paul Pester will stay in his post heading the Verde unit. Even the old TSB branding will be used for "two or three years" before the branches are brought under the Co-op umbrella. Last but not least, potentially offering some balm to bruised shareholders, the Verde business will use Lloyds systems under a commercial agreement. None of this has yet been approved by the FSA, but with the authorities having kept a close eye on negotiations, there is no reason to think that it will object. Just don't expect Lloyds to be shouting from the roof tops.