Regulator defends Flowers’ Co-op Bank appointment

THE official who backed the appointment of the former Co-op Bank chairman Paul Flowers has told MPs he “stands by the decision”.

Appearing at the Treasury Committee, Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), who interviewed Rev Flowers in 2010 for the post of non-executive chairman, said he knew the former Labour councillor and Methodist minister did not have any experience in banking,  but said the right decision was made at the time.

The Co-op Bank was rescued last year under a deal with bondholders, and suffered a major reputational blow when Rev Flowers’ arrest for alleged drugs offences hit the headlines.

Revelations followed about past criminal convictions and allegations about his use of expenses during his time with a Manchester drugs charity too, sparking questions as to his suitability for the role.

Rev Flowers joined the Co-op board in 2009 as a non-executive director.
Mr Adamson said Flowers’ lack of experience in banking did not matter, as his job was to control the “unruly” 22-strong board of the bank.

Chairman of the Treasury Select Committee, Andrew Tyrie MP said the regulator’s decision to put a “financial illiterate” in charge of its board was a “negligent decision, a very poor decision”.

But Mr Adamson said he had gone further than was required by meeting Mr Flowers in 2010, and had attempted to make up for his lack of financial experience by appointing two deputies.

He said that no-one had told the regulator about the drugs allegations.
“I don’t think it was a mistake in terms of the decision I made at the time,” he said. “I do regret what subsequently happened. Today he wouldn’t be approved as we would look for more experience.”

Investigations into problems at the Co-op Bank have been launched by the Bank of England’s Prudential Regulation Authority and the FCA.

The PRA said it would look into events at the bank that led to it needing a £1.5bn rescue, and the role played by senior managers.

The FCA said its investigation would “look at decisions and events up to June 2013”.  

The action could lead to significant fines and bans for senior directors if they are found to have breached the rules.