Former Co-operative Bank chair Paul Flowers was hired for his leadership skills and doing “very well” in psychometric tests despite his lack of banking expertise.
Speaking to the Treasury select committee today, former Co-op Bank deputy chairman Rodney Baker-Bates said Flowers did not have the financial expertise to run a bank.
When questioned by the TSC last year Flowers, who was an economic adviser to the Labour party, did not know the size of the Co-op Bank’s balance sheet or loan book.
Last year, FCA director of supervision Clive Adamson revealed that Flowers was only subjected to one FSA interview, lasting an hour and a half, when he was hired as chairman in May 2010 and described him as “articulate and cogent”.
Baker-Bates, who also applied for the role of chairman, said Flowers was chosen by the bank because he had done “very well” in the psychometric tests despite being “ignorant” of finance.
Conservative MP Jesse Norman said: “So he was psychologically well balanced although ignorant about finance.” TSC chair Andrew Tyrie said Flowers was “psychologically unbalanced but psychometrically brilliant”.
Baker-Bates said: “Paul did really work hard – in fact I gave him some tutorials to get through his Significant Influence Function interviews – to learn about banking and to learn from me the skills he needed to take the role on.
“He certainly had a much better understanding of the complexity and politics of the membership of the Co-op group.”
Davies told MPs Flowers was also hired because of his leadership skills but admitted he did not have the expertise to run a bank.
Davies said: ”The explanation given to the board was that Paul was chosen primarily, if not entirely on his leadership abilities. Ideally you would need a balance between leadership and financial skills. If you weren’t able to have both then leadership would be the primary recommendation.”
Flowers, who was also an economic adviser to the Labour party, resigned in June last year after the Co-operative Bank revealed a £1.5bn black hole. Bondholders have lost money in a major restructuring of the bank.
In November he was arrested on allegations of buying crystal meth and crack cocaine.