Lloyds chiarman Sir Winfried Bischoff was personally handed a document raising doubt over Co-op Bank's capital position, claims NBNK (Reuters)

NBNK claims it warned Lloyds that Co-operative Bank's weak capital position threatened to kill its bid to take over hundreds of the bank's branches by personally handing Chairman Sir Winfried Bischoff a document at a meeting in January 2012, despite Lloyds telling parliament it had no knowledge of any issue until December.

Lord Levene, who was leading the ill-fated NBNK bid for the 632 branches under Lloyds' Verde sell off, said he gave the document directly to Lloyds chairman Bischoff to be shown to the board in that January.

The document, released to the Treasury Select Committee which is probing the failed branches sale, highlighted Co-op Bank's "weak capital structure", its "over-stretched" finances, and said the Verde deal was at "high risk" of falling through.

It also warned that delays to the branch sales would hinder the government's attempt to sell off its 39% stake in Lloyds, acquired during a financial crisis bailout to save it from collapse, and generate an early return for taxpayers.

Co-op pulled out of its bid for 632 Lloyds branches in April, claiming that the purchase would not be in the interest of its customers.

In June the bank revealed it had a £1.5bn capital hole on its balance sheet, as regulators demand financial institutions shore themselves up with more cash to buffer against future potential losses. Co-op plans to convert its junior bondholders into shareholders in a "bail in" to plug the gap, though Moody's slashed the bank's ratings and warned of an imminent default.

A spokeswoman from the Co-op Bank refused to say when it had directly informed Lloyds of capital problems on its balance sheet. She questioned how rival bidder NBNK would have any knowledge of Co-op's capital position in January 2012.

"The 'Key Risks' document was clear, written with the help of advisers, and on the basis of discussions with certain third parties, all of whom questioned the ability of the Co-operative to execute Verde given the other pressures on the group," said Lord Levene's written submission to the TSC.

"It is also worth pointing out that NBNK shared its concerns directly with the Co-op Group CEO and the 'financial expert' on the Co-op board."

The TSC will likely haul Co-op Bank executives in front of MPs to hear its version of what happened.

Bischoff had told MPs on the TSC he could not remember being given the document. A Lloyds spokesman said the bank has "no record or recollection of receiving this document".

Lloyds executives told the same committee that they were not aware of Co-op's capital problems until December 2012, almost a year after Levene said he handed Bischoff the document flagging the bank's weak position as it sought to secure the branches.

Levene told This is Money that Bischoff's claim was "astonishing".

"If I had received this kind of information and not remembered it or shared it with my board I would have been in big trouble," he said.

Separately, Andrew Bailey, Bank of England deputy governor for financial stability, said he told Co-op in late 2011 that it had capital issues on its balance sheet.

"We never approved the Co-op bid for the Verde branches. Going back to the outset of the process, about two years ago when it was first an idea, I said to the board of the Co-op Bank that they needed to raise capital," Bailey told the TSC.