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It was a shock when the FCA banned former Co-operative Bank chairman Paul Flowers from the financial services industry this month.
Of course, it was no surprise that the so-called ‘crystal Methodist’ was banned for life, but it was a huge shock just how long it took the regulator to act.
For those with short memories, Paul Flowers was chairman of the Co-op Bank when it revealed it had a massive £1.5bn black hole at the heart of its accounts in 2013.
He took responsibility for the collapse of the bank, but blamed it on the takeover of the troubled Britannia building society in 2009. He shot to nationwide fame after a film was published by a national newspaper of him handing over £300 in £20 notes to a drug dealer in the back of a car in Leeds in November 2013 and tales emerged of his activities with rent boys. The following year he was fined after pleading guilty to possession of cocaine, crystal meth and ketamine.
Swift and severe
His fall from grace was swift and severe. He lost his £132,000 a year salary from the Co-op as soon as the scandal broke. The Methodist church – where he had been a minister for more than 40 years – suspended him too. He ceased to hold any roles in the Labour Party after having been a local councillor for years and a member of the party’s finance and industry advisory board. That, you would have thought, should have been that.
But that doesn’t take into account the grindingly slow actions of the financial regulator. It finally banned Flowers from the financial services industry on 6 March 2018. That was almost five years after he resigned from the Co-op bank on 5 June 2013. That’s 1,735 days it took for the FCA to investigate Flowers’ actions and come to a decision.
Now when it comes to the governance of a bank it’s clear that there are lots of things to consider particularly when it comes to the actions of the chairman.
How much responsibility did Flowers actually have for the collapse of the 146-year-old bank?
In fact Flowers hasn’t been banned for his lack of financial acumen, but for misusing a Co-op phone and email address. After its exhaustive investigation the FCA revealed that: “On nine separate occasions in the period 22 May 2011 to 16 June 2011, Flowers used his work mobile telephone for personal use to call a premium rate chat line, in breach of the expenses policy.”
It also reported: “The Authority has reviewed emails to and from Flowers’ work email account that contain sexually explicit and otherwise inappropriate content.”
Finally it said: “Flowers also used his work email account to discuss the purchase, the taking of and offering to provide to others, illegal drugs.”
I don’t want to be uncharitable to the regulator but everyone knew this years ago. In fact the Co-op Bank gave Flowers a formal warning about the sex chat lines back in 2011 and his drug conviction was in 2014.
So what has the FCA been investigating all these years? The evidence was laid out for them to take quick action and be seen as a strong enforcer.
Instead this month’s belated ban makes them seem a bit of a laughing stock. The truth is that it’s not easy to ban someone.
There’s apparently a detailed legal process that has to be undertaken and, as we all know, anything that requires the intervention of the law is going to run up a time-consuming and expensive bill.
It’s probably for that reason that so few ‘big cheeses’ are actually banned from the financial services industry. I’ve struggled to recall anyone else other than Flowers. The fact that his was a virtual open and shut case presumably encouraged the FCA’s officers to continue with their task despite the tedious barriers to their progress.
But if that really is the case then I reckon that’s a total joke.
The financial services industry will never be fully trusted by consumers until all the crooks, chancers, rogues and conmen are weeded out. If it takes so long for the FCA to act that it often doesn’t bother, then that sends out completely the wrong message. Anyone who deals with consumers’ money needs to have integrity and be trustworthy.
The bad eggs, when uncovered, need to be dealt with swiftly, rather than allowed to be stinking the whole industry out for years while the wheels of justice slowly edge on.
If the FCA doesn’t have strong enough regulatory powers to act swiftly, then it should be given them. And quickly. The longer scandals are allowed to hang around unresolved, the longer people will continue to look at financial advisers with a suspicious eye.
Simon Read is a freelance journalist
