Ex-Co-op Bank bosses banned and fined

TWO former executives of the Manchester-based Co-operative Bank, ex-ceo Barry Tootell and corporate banking MD Keith Alderson, have been banned from holding senior banking positions.

The action by the Bank of England’s Prudential Regulation Authority relates to their role in the near collapse of the lender in 2013, which related to problems stemming from the earlier merger with Britannia Building Society.

This is the first time the Bank of England’s regulatory arm has used its new powers to take action against individuals.

The PRA said both men had committed breaches related to the running of the Co-op Bank. Mr Tootell was fined £173,802 and Mr Alderson £88,890.

In August 2015 the PRA publicly censured the Co-op Bank for, among other things, failing to have in place adequate risk management systems. The PRA found that the Co-op Bank’s failings had the potential to weaken the firm and reduce its resilience.

After an investigation the PRA has concluded that, between  January 1 2009 and May 10 2013, Tootell did not “exercise due skill, care and diligence in carrying out his role” as chief financial officer and later chief executive.

It added: “As CEO, Mr Tootell played a significant role in the Co-op Bank managing its finances and capital position in a manner that was not in line with the firm’s own stated cautious risk appetite.”

With regard to Keith Alderson, the regulator found he “did not exercise due skill, care and diligence in carrying out aspects of his role as director of corporate banking and later the managing director of the corporate and business banking division.”

Mr Alderson, the PRA said, did not take reasonable steps to ensure that Co-op Bank adequately assessed risk arising across the Britannia Corporate Loan Book.

Andrew Bailey, Deputy Governor, Prudential Regulation, Bank of England and chief executive f the PRA said: “Banks that are not well governed have the potential to pose a threat to UK financial stability.

“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 Co-op Bank had to be rescued by hedge funds when a £1.5bn hole appeared in its books in 2013. Its near collapse caused huge financial problems for The Co-operative Group, which at the time was the parent organisation.

The Institute of Directors said the PRA’s action should be a warning to all directors of the danger of complacency on boards.

Director general Simon Walker said: “This is further proof that the leadership of the Co-operative Bank in the run up to its spectacular failure was woefully lacking in the skills, knowledge, and decision-making needed for a major financial institution.  It is stark reminder that even brands which carry a positive public reputation can have it snatched away from them if their corporate governance isn’t up to scratch.

“The Prudential Regulatory Authority has censured two executives  for putting short-term profits ahead of the long term sustainability of the bank, but there was clearly also a failure on the part of the whole board.”