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Martin Wheatley defends FSA handling of ex Co-op chair Flowers’ appointment

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.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Sorry but the picture tells a tale !!
    Those who remember Max Bygraves ” I wanna tell you a story” !!!!

  2. “Wheatley admitted his job comes with “political pressure”

    He sure got that one right.

    When Crash Gordon invented this system of regulation one has to admit it was a cute political move.

    When things go wrong it enables the Government to say “It ain’t us – it’s the independent regulator” And when things go right they are quick to take the credit.

    Someone somewhere was responsible to oversee this sort of thing – one presumes – otherwise they could have even me running a bank.

  3. So there you have it folks our financial institutions can be run by utter incompetents and the FSA (FCA) couldn’t do a thing about it. Of course the 2 man IFA firm have to demonstrate their competence every year and be fined if they don’t report on time. Of course I doubt we’d ever see a 1.5 billion black hole, but the fist of regulation is there to strike anyone getting out of line. A Country nearly brought to its knees by the banking system and a regulator saying; nowt to do with us gov. You couldn’t make it up.

  4. ” What we did do………” We? Isn’t the FCA forever claiming itself to be an entirely separate and different entity from its predecessor, the FSA? Just who are/were these “we’s”?

    And is it not somewhat beyond belief that even the FSA didn’t have the power to block such an appointment? If that was the case, then what was the point of the Co-op even bothering to consult the FSA when its appears to have been entirely at liberty to ignore any concerns raised from that quarter? Didn’t the FSA have sufficient powers to block any proposed appointment, no matter how dodgy and unsound it may have appeared? One would have expected such powers to be a cornerstone of its capacity to prevent something like this happening.

    Next thing we know, Mr Wheatley will be asking us to believe that the FSA could have done nothing to prevent the banking crisis of 20008 on the grounds that it didn’t have sufficient powers. Were that the case, then why was Clive Briault given the order of the boot for his failure to prevent the meltdown of Northern Rock? Curiouser and curiouser.

  5. The good Reverent was CF2 at the CoOp. The FSA handbook sates. and I quote “Approval is only granted by the FSA if it is satisfied that the individual candidate is a fit and proper person to perform the controlled function applied for.”

    I am interested to know on what basis Mr Wheatley believes the FSA did not have the power to act?

  6. @James – You’re making the mistake of quoting the written handbook as oppsoed to the one in the F-packs head which has an addendum which says “Approval is only granted by the FSA FOR ADVISORS if it is satisfied that the individual candidate is a fit and proper person to perform the controlled function applied for AND IF DO NOT HAVE THE BALLS TO POINT OUT WE ARE BREACHING OUR OWN RULES, WE’LL DO AN AL CAPONE ON THEM.” And the second addendum “IF WE MAY WANT TO APPLY FOR A SENIOR POSITION AT YOUR FIRM IN THE FUTURE OR WANT A RECOMMENDATION FOR A KNIGHTHOOD, APPROVAL IS GUARANTEED.

    As you may have guessed, having quoted the rulebook back at the FCA with regard Timebars, longstops and consumer rights and responsibilities, the FCA are now trying out the Al Capone method with me it would appear.

  7. Mr Wheatley appears to be being somewhat disingenuous in saying that the FSA countered his inexperience by insisting on the appointment of two deputies who were experienced. However, I think that the Co=OP had about 20 directors and I further gather that the two with experience actually voted against the proposals. I would have expected that even the FSA could have worked out that, as most of the board were poitical place-men without experience, there cunning plan could not possibly work.
    Mind you, it did tick the boxes.

  8. @David Cowell – Is disingenuous anywhere near a lie? Is it similar to bearing false witness?

    Lucky it wasn’t Sir Hector the Undeserved having to make that statement as he might have a problem with the ninth commandment saying that!

    A reminder from good old wikapedia for those who seem to have forgotten this one.

    “You shall not bear false witness against your neighbor” is the ninth (respectively the eighth according to the Catholic and Lutheran count[1]) of the Ten Commandments,[2] which are widely understood as moral imperatives by legal scholars, Jewish scholars, Catholic scholars, and Post-Reformation scholars.[3] The book of Exodus describes the Ten Commandments as being spoken by God,[4] inscribed on two stone tablets by the finger of God,[5] broken by Moses, and rewritten on replacements stones by the LORD.[6]

    There are six things that the LORD strongly dislikes, seven that are an abomination to him: haughty eyes, a lying tongue, and hands that shed innocent blood, a heart that devises wicked plans, feet that make haste to run to evil, a false witness who breathes out lies, and one who sows discord among brothers.
    — Proverbs 6:16–19
    The command against false testimony is seen as a natural consequence of the command to “love your neighbor as yourself.” This moral prescription flows from the command for holy people to bear witness to their deity. Offenses against the truth express by word or deed a refusal to commit oneself to moral uprightness: they are fundamental infidelities to God and, in this sense, they undermine the foundations of covenant with God.[7]

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