Co-op Group faces tough questions over bank's £1.3bn loss

Lord Myners is under intense pressure to rethink his initial plans, which include scrapping the current board. Photograph: Oli Scarff/Getty Images

The troubled Co-operative Group faces fresh controversy this week when its banking arm scrambles to explain how it racked up £1.3bn of losses last year. Lord Myners, the director appointed to overhaul the way the mutual organisation is run, is also coming under growing pressure to rethink his blueprint for reform.

The bank – now just 30% owned by the Co-op Group – delayed its 2013 results last month and pledged to publish the full detail of the losses "on or before" Tuesday 8 April . It is not yet clear when they will be released, potentially unleashing fresh controversy over pay, as details of the rewards to Niall Booker, the new bank boss parachuted in last year, are expected to be revealed.

Booker was part of the team assembled by Euan Sutherland, the boss of the Co-op Group, whose operations include supermarkets, funeral homes and pharmacies. Sutherland walked out last month, after details of his £6.6m two-year deal were published by the Observer, a departure that sparked a fresh crisis at the Co-op and forced Myners, appointed in December with a remit to overhaul the governance of the group, to publish his ideas a month earlier than planned.

Myners is under intense pressure to rethink his initial plans, which include scrapping the current board which comprises 15 members from regional boards, five from the independent co-op and himself, the sole independent director.

He is suggesting setting up a board more akin to a public company with a seat for the chief executive and a separate national members' council to represent the views of the 7 million members who own the Co-op.

But this idea will need the backing of the powerful regions, which have the potential to block Myners' plans, and it is also facing resistance from some quarters because it does not give members a direct voice on the boards. This has raised fears that the axing of the regional boards would reduce the accountability of senior management.

The regional boards have a say over 78% of the votes at crucial member meetings which will be called to endorse reforms. The North West board has yet to meet, but many of the boards met on Friday and Saturday and concerns are said to have been voiced about the initial proposals.

There are suggestions that they have voted against the Myners' proposals although some stress there has been no formal show of hands and that the proposals are not complete.

Myners, who was chairman of Guardian Media Group before he became Labour's City minister during the 2008 banking crisis, is expected to publish the full version of the first stage of his report later this month – after the Co-op's results are released on 17 April when losses of at least £2bn are expected.

Sutherland's departure has left the group without a permanent replacement as chief executive while it faces ongoing controversy over the retention packages handed to other members of his team.

The bank's annual report should reveal whether Booker received theretention packages handed to other members of the remaining group executives, including Richard Pennycook, the former Morrison's finance director. He is currently acting chief executive and under pressure to hand back the £900,000-a-year retention payment which came on top of his similar size salary. The annual report will reveal any ongoing payments to past directors of the bank.

The group also needs to decide whether to back a surprise £400m fundraising initiative announced by the bank last month to cover a fresh wave of compensation from customers. It would need to find £120m if it is to maintain its 30% stake.