The Treasury is to conduct an independent review into the prudential supervision of the Co-operative Bank between 2008 and 2013, more than four years after an investigation into oversight of the troubled lender was first promised
This comes as the Financial Conduct Authority (FCA) has banned Paul Flowers, the Co-op Bank’s former chair, from the financial services industry.
The independent review, conducted by the Prudential Regulation Authority (PRA), will look into the supervision of the Co-op Bank during a significant period for the group, including its withdrawal from the bidding process to purchase 632 bank branches from Lloyds Banking Group (known as Project Verde) in 2013, to understand what lessons can be learned.
It will be led by Mark Zelmer, who has over 30 years’ experience in financial services regulation and policy. He is a former deputy superintendent of the Office of Superintendent of Financial Institutions, Canada, and previously a senior official at the Bank of Canada, International Monetary Fund, and representative on the Basel Committee on banking supervision and the Financial Stability Board.
John Glen, economic secretary to the Treasury, said: ‘The review will look at the actions, policies and approach of the Financial Services Authority, and latterly the PRA, as the institutions with statutory responsibility for the prudential supervision of the Co-op Bank during the period in question.
‘It will focus on the outstanding questions identified by the House of Commons Treasury committee (TSC) in its 2014 report on Project Verde.
‘As recommended by the TSC, the review will have full access to all relevant documents and correspondence, including the record of government contacts concerning the Lloyds “Verde” bidding process.’
An independent review into the events surrounding the financial collapse of Co-op Bank amid accusations of funding problems and poor corporate governance was originally announced in November 2013, by the then Chancellor, George Osborne.
The Treasury subsequently said it would be delayed until the Financial Conduct Authority (FCA) had concluded its enforcement investigations into the Co-op Bank and related individuals, which are now complete.
Nicky Morgan, chair of the Treasury committee, said the inquiry was ‘hugely overdue’.
‘Although much has changed since the events in question, a forensic examination of the circumstances of Co-op Bank’s failure will no doubt yield important lessons for the financial regulators.
‘The committee will want full transparency on the findings of the investigation, and I will be writing to Mark Zelmer setting out our expectations,’ she said.
Ban for former Co-op chair Flowers
Separately, the FCA has banned Paul Flowers, the Co-op Bank’s former chair, from the financial services industry.
The regulator said his conduct as chair between April 2010 and June 2013 ‘demonstrated a lack of fitness and propriety required to work in financial services’, and said its investigation had found he had demonstrated an unwillingness to comply not only with the FCA’s requirements and standards but also with other legal, regulatory and professional requirements.
Mark Steward, FCA executive director of enforcement and market oversight, said: ‘Mr Flowers failed in his duty to lead by example and to meet the high standards of integrity and probity demanded by the role.’
The FCA found Flowers used his work mobile telephone to make a number of inappropriate telephone calls to a premium rate chat line in breach of Co-op Group and Co-op Bank policies; and used his work email account to send and receive sexually explicit and otherwise inappropriate messages, and to discuss illegal drugs, in breach of Co-op Group and Co-op Bank policies despite having been previously warned about his earlier misconduct.
In addition, after stepping down as chair, Flowers was convicted for possession of illegal drugs.
FCA final notice for Paul Flowers
Report by Pat Sweet
