On 15 January Barry Tootell, the former chief executive of the Co-operative Bank, and Keith Alderson, the former managing director of the Co-op Bank’s corporate and business banking division, were banned from holding significant influence functions at PRA-regulated firms.
Mr Tootell has been fined £173,802 while Mr Alderson has been fined £88,890.
Andrew Bailey, chief executive of the PRA, said that banks which are not well governed have the potential to pose a threat to UK financial stability.
He added: “The actions of Mr Tootell and Mr Alderson posed an unacceptable threat to the safety and soundness of the Co-op Bank, which is why we have decided a prohibition is appropriate in these cases.
“This action makes clear that there are serious consequences for senior individuals who fall short of the PRA’s expectations.”
The PRA concluded that, between 1 January 2009 and 10 May 2013, Mr Tootell did not exercise due skill, care and diligence in carrying out his role as chief financial officer and later chief executive.
In particular, the PRA said that between 22 July 2009 and 10 May 2013 Mr Tootell was centrally involved in a culture within the Co-op Bank which encouraged prioritising the short-term financial position of the firm at the cost of taking prudent and sustainable actions to secure the firm’s longer-term capital position.
Meanwhile, the PRA found Mr Alderson did not take reasonable steps to ensure Co-op Bank adequately assessed risk arising across the Britannia corporate loan book and between 1 August 2009 and January 2011 did not escalate specific risks inherent in that loan book sufficiently clearly to the bank’s formal risk management processes.
In 2009 Britannia Building Society was merged with the Co-op Bank.
The PRA recognised Mr Tootell and Mr Alderson did not deliberately or recklessly breach regulatory provisions and made no findings of dishonesty or lack of integrity against them.
Andrew Tyrie, the chairman of the Treasury select committee, said: “The greater responsibility on firms that comes with the senior managers’ and certification regimes – now better supported by deferral and claw back of remuneration – is a huge improvement on the old regime.
“But the regulators need to shoulder more responsibility, too. They have to be capable of exercising enough judgment to interpret the rules, and determined enough to apply them. They appear to have been so in this case.”
The ban and fines come two years after regulators confirmed enforcement investigations were taking place into events at the Co-operative Bank that led to it needing to be saved by refinancing led by US hedge funds.
In August 2015, the bank escaped a £120m fine from the PRA for “serious and wide-ranging failings” in its control and risk management framework, as a financial penalty was deemed not to advance the safety and soundness of the firm.”
Following an enforcement investigation by the PRA into the period from 22 July 2009 to 31 December 2013, the regulator also issued a public censure against the bank for breaching its listing rules.
Later that month, the Co-op Bank admitted its financial performance continued to be impacted by legacy issues, reflected in a first-half statutory loss before tax of £204.2m, £127.2m higher than during the six months of last year.
