An influential group of MPs has called for an independent review into the Co-operative Bank debacle, warning that a reported investigation into the approval of directors led by the Financial Conduct Authority itself would be akin to the regulator “marking [its] own work”.
According to a report in The Telegraph, the Financial Conduct Authority has begun an investigation into the role of former senior directors at the Co-operative Bank.
The move follows The Mail on Sunday’s publication of video footage which appears to show the bank’s former chairman and methodist minister Paul Flowers buying cocaine and crystal meth just days after he appeared before the Treasury Committee.
Mr Flowers has apologised in the wake of the drug allegations and since been suspended from both the Labour Party and the Methodist Church.
He was appointed to the Co-op board in 2009 and was chairman between March 2010 and July of this year, when he stepped down amid a capital crisis that has seen its mutual parent cede majority control to US hedge funds.
Questions have been raised over the approvals process that led to his appointment, in particular because Mr Flowers had no banking experience prior to his appointment. One of the members of the FSA panel that approved Mr Flowers later took a non-executive director role at the bank.
Andrew Tyrie, the Treasury Committee chair who earlier this week warned over weak reforms to the approvals process in the wake of the revelations, said the regulator should not conduct the investigation itself and should consult with his committee prior to undertaking any review.
He said: “The Treasury Committee strongly recommends that any review into the Co-op bank be conducted by an independent person. The authorities cannot be seen to be marking their own work.
“It would [also] need to wait until any enforcement action had concluded. The Committee expects the regulator to discuss with interested parties, including the Treasury Committee, the scope and structure of the review.”
Under the Financial Services Authority’s approvals regime, Mr Flowers was interviewed before being appointed to the board and before becoming chairman.
Previously, Mr Tyrie said the scandal engulfing Mr Flowers highlighted how much reform into the ‘approved persons’ regime was required.
He said: “The approved persons regime degenerated into little more than a bureaucratic box-ticking exercise. Its shortcomings were already manifest nearly four years ago.
“Yet, until the Banking Commission proposed that it be scrapped and replaced with something fit for purpose, little was done to sort it out.”
Last month, the FCA rejected calls to extend a tough new ‘senior persons regime’ for bankers across the financial services industry but has proposed toughening up the existing approved persons regime by introducing a set of ‘individual standards’ rules.
The new regime would include new criminal sanctions for reckless misconduct by senior bank staff and will “set expectations” for senior staff rather than simply acting as an “initial gateway”
