The report also calls into question the initial decision in 2007 to embark on a complete replacement of its core systems, rather than continuing with its existing platform and beginning remediation efforts.
When the project began, the Co-op Bank was the first major UK bank to attempt such a "risky" transformation — with Nationwide not completing its move onto a SAP core banking platform until November 2013. The report states said that the Co-op Bank had failed to sufficiently consider the possibly of alternatives to a complete overhaul of core systems, and "overestimated" its capability to deliver such a complex programme of change.
Undertaking such a major transformation is "a brave decision" for any bank, said Kelly, due to the technical difficulties involved, but the Co-op Bank's small size meant that a failure would have a "disproportionate effect" on its capital compared to larger lenders.
"The Bank...recognised that the replatforming project was risky. But it was attracted by the idea of leapfrogging the competition and gaining an advantage, or better protecting its position, through improved customer relationship management and quicker delivery of new products."
He added: "It is important to be realistic about the scale of projects undertaken, and the burden this places on the organisation."
The decision to overhaul its platform was further complicated as the bank announced its acquisition of Britannia building society in 2009.
Typically a merger will involve moving one bank onto another's existing platform, but the Co-op Bank management decided to attempt to transfer both onto a newly created system at the same time.
"Even if the dual migration risk is ignored, continuing the replatforming programme while simultaneously attempting to integrate the two entities was itself very risky. Both would require a significant amount of senior management attention. It was almost inevitable that one, if not both, projects would be compromised."
Kelly also claims that senior management teams were not sufficiently engaged with the project to ensure its success.
"The importance of the replatforming programme to the Bank's future strategy, its high risks and the size and unpredictability of its likely costs in relation to the Bank's profitability and capital might all have been expected to cause the Bank's Executive and Board to pay it particular attention," he said.
"It is difficult to avoid the conclusion that both Board and Executive failed to interrogate the programme sufficiently closely and paid inadequate attention to its obvious difficulties until it was too late."
Kelly also described the communication between the three teams overseeing the various IT projects at the bank as "weak", with reports of "personal animosity" between those in charge of the main IT staff, the Finacle implementation team, and those involved in additional technology programmes.