The Financial Conduct Authority and the Prudential Regulation Authority have confirmed they will be undertaking enforcement investigations into events at the Co-operative Bank that led to it needing to be saved by a refinancing led by US hedge funds.
The investigation will look at the decisions and events up to June 2013, the regulators said.
The PRA said part of the investigation will consider the role of former senior managers. Questions have been raised over the approvals process that led to the bank’s former chairman Paul Flowers’ 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.
In a statement, the FCA said: “The independent review announced by the chancellor will commence once it is clear that it will not prejudice any actions that the regulators may take.
“This sequencing is necessary to ensure that the outcomes of the enforcement work are not prejudiced and follows the approach taken for both the RBS and HBOS reports.”
In November chancellor George Osborne ordered an independent investigation into events at the Co-op Bank and the circumstances surrounding them.
The investigation has been jointly agreed with the two regulators, the Prudential Regulation Authority and the FCA, both of which said there is a public interest in a statutory investigation. It will be led by an independent person approved by the Treasury.
The probe will cover the actions of relevant authorities, regulators and government, and the institution itself, including prudential issues, governance, appointment of senior staff and acquisitions.
The move follows The Mail on Sunday’s publication of video footage which appears to show methodist minister Mr 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.
