Former Bank of England governor Lord King has rebuffed suggestions that he was aware of any improper political interference in the decision by state-backed Lloyds Banking Group to sell more than 600 branches to the Co-operative Bank.
Lord King wrote to the Treasury Select Committee to respond to a claim made by the head of a rival bid team.
Lord Levene, who was chairman of NBNK Investments, had told MPs that Lloyds was "swayed by political considerations" when it chose the Co-op to take on the branches and said the then-governor had acknowledged this.
But in a letter to committee chairman Andrew Tyrie published today, Lord King rebuffed the suggestion.
"Although it seemed to me that the Government wished to ensure that, if it were possible, a plausible bid from the Co-operative Bank was able to be considered alongside other bids, that was a far cry from any improper conduct in the bidding process," he said.
"Had I received evidence of improper behaviour I would have raised that with the regulator, the Government, and if necessary, Parliament, through the Treasury committee."
During the exchange, Ms Leadsom put it to the peer that it would be "utterly astonishing" for the governor to stand by and allow political interference in the process to have taken place and asked whether he had put this to him.
Lord Levene replied that it would not have been wise to "tell the Governor of the Bank of England how to do his job".
Lord King also said in his letter that at a meeting in July 2012 after Co-op had won the Verde bid, Lord Levene and another NBNK director had complained about political pressure but acknowledged they had no evidence of this.
MPs are investigating the Verde deal, in the wake of its collapse after the discovery of a £1.5 billion hole in the Co-op bank's finances.
Lloyds, which had been obliged to dispose of the branches under EU rules following its taxpayer rescue during the financial crisis, instead spun them off under the revived TSB brand - which is expected to be floated later this year.