Prime Minister David Cameron has called for a regulatory inquiry into the appointment of Reverand Paul Flowers at the Co-operative Bank.
Speaking at Prime Minister’s Questions today, Cameron said Chancellor George Osborne is holding talks with regulators.
MPs have lashed out at the FSA for approving the appointment of Flowers to a senior banking position. Giving evidence to the Treasury select committee appearance last week Flowers did not know the size of the Bank’s balance sheet or loan book.
Flowers, a Methodist minister and former Labour councillor, joined the Co-op Group’s board in 2008 and was chairman of Co-op Bank from April 2010 until June.
He has been suspended by The Methodist Church and Labour after he was caught on camera buying illegal drugs, with the video passed to the Mail on Sunday. Flowers has since apologised for his actions and Co-op Group chairman Len Wardle has quit with immediate effect.
Cameron said: “The Chancellor will be discussing with the regulators the appropriate form of inquiry. There are clearly a lot of questions that need to be answered.
“Why was Reverend Flowers judged suitable to be chairman of a bank? Why weren’t alarm bells rung earlier, particularly by those who knew? It will be important that if anyone does have information they provide it to the authorities.”
The Co-op Bank has become a political football since the weekend with the parties trading blows over Labour’s links to the Co-op Group and whether the Government lent political support to the bank’s bid for Lloyds Banking Group branches.
Independent financial consultant Richard Hobbs says: “Leaving aside the drugs revelations, the fact that a Methodist minister with no knowledge of banking was allowed to preside over a bank is very strange.”
Former FSA head of ethics David Jackman says the approved persons regime “has been too easy for too long”.
He adds: “The FCA is applying tougher criteria but still needs to do more to probe senior individuals.”
Treasury select committee chairman Andrew Tyrie said this week the regulator’s process for vetting bankers had been “a complete disaster”.
TSC member Mark Garnier says: “The guy is clearly incompetent. Forget the drugs stuff, when we interviewed him he didn’t even know the size of the Co-op Bank’s balance sheet.
“The Treasury committee will be asking how the hell the regulator signed this guy off. He was clearly way, way out of his depth.”
A spokesman for the FCA says: “Paul Flowers underwent the appropriate interview process when originally coming onto the Co-op board.
“The FCA supports the proposal by the Parliamentary Commission on Banking Standards to introduce a senior persons regime.”