FCA chief executive Martin Wheatley has defended the FSA’s handling of the appointment of Reverend Paul Flowers as Co-operative Bank chairman in 2010.
Flowers was appointed non-executive board member to the Co-op Bank in 2009 and chairman in March 2010 before leaving in June this year.
Last week he was arrested on suspicion of supplying drugs after a flurry of allegations surrounding his private life.
Speaking on the BBC Sunday Politics yesterday, Wheatley said the FSA did not have the powers to approve Flowers when he became chairman in March 2010.
He said: “Today it would be different. It would not happen in the same way but that was the system at the time. We did challenge him and say ‘you don’t have the right experience’ but at the time we would not have opposed the move. What we would have done is to say ‘you need additional people on the board who do have banking experience’.
He added: “There was not a requirement to approve the role as chairman. There wasn’t even a requirement to interview at that stage. What we did do was make sure he was interviewed and have others on the board with experience.”
Wheatley also suggested regulators contested the Co-op Bank’s bid for 632 Lloyds Banking Group branches ahead of the deal collapsing in April.
He said: “That was the Co-op’s plan and it needed to pass our test that it was fit enough to do it and, frankly, it never passed that test. We were constantly pushing back and saying you have not got the capital, the people or the systems and ultimately they withdrew when they realised the questions we were asking could n’t be answered.
“What we were doing was asking the questions about ‘can you do this deal?’ and take it over. We kept pushing back and we never got a business plan we were happy to approve.”
Labour and the Conservatives have been involved in a bitter round of recriminations over Labour links to the bank and political interference in the takeover.
Wheatley admitted his job comes with “political pressure” but said the regulator is focused on the technical side of regulation.
MPs have branded Flowers “incompetent” and lacking experience to lead a major bank after he did not know the size of the Co-op Bank’s balance sheet or loan book at a Treasury select committee hearing earlier this month.
The FCA is considering whether to launch enforcement action against the bank and former directors as the Treasury ordered an independent inquiry into events at the bank.
The Co-op Bank discovered a £1.5bn black hole in June and was forced into a rescue plan that would see it 70 per cent owned by bondholders.