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MPs to grill FCA supervision head over Co-op Bank failings

The Treasury select committee is set to grill FCA director of supervision Clive Adamson over his role in the Co-operative Bank saga.

Adamson, who was also FSA director of the regulator’s major retail groups division from 2008 to 2011, will face the panel on Tuesday as part of its investigation into the failed Co-op Bank bid for 632 Lloyds Banking Group branches.

The Co-op Bank ran into trouble earlier this year when it revealed a £1.5bn capital black hole caused by losses on commercial loans, chiefly from the 2009 merger with Britannia Building Society.

Adamson was involved in the regulatory scrutiny of the Britannia merger in his previous role. Since 2011 he has also been responsible for supervising firms, including when the Co-op Bank revealed a £1.5bn capital black hole.

The MPs’ inquiry was launched in June to examine the failed Lloyds’ branches bid but has also investigated other issues around the Co-op’s governance and regulatory oversight in more depth.

MPs have already quizzed the Prudential Regulation Authority and blasted regulatory failings over the Co-op Bank.

The Treasury has ordered an independent review of the Co-op Bank while the FCA is investigating the bank and its directors.

There is also a police investigation into former Co-op Bank chairman Reverend Paul Flowers over drugs allegations.

In addition the Co-op Bank has launched an internal review of governance to be lead by former Treasury financial secretary Lord Paul Myners.

Adamson will appear before MPs at 10am on 7 January.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. To MM – I presume you mean 7th January, not 7th December?
    The TSC is admirable for trying to get to the bottom of things but they cant actually do anything, can they?

  2. Didn’t Martyn Wheatley claim that the FCA is “a very different animal from its predecessor”? How can it be when it employs so many of the same people? I suppose it’s not entirely reasonable to expect him to turn a juggernaut on a sixpence, but he certainly has his work cut out.

    That said, will anything actually happen to Mr Adamson should the TSC conclude that he failed badly to discharge his responsibilities to prevent this latest train wreck? Maybe another golden parachute a la Clive Briault? Surely not.

  3. Could it be that the purpose of Mr Wheatley’s defence of the FSA’s apparently inadequate oversight of Paul Flowers’ appointment is to deflect attention away from certain individuals who now work for the FCA? Clive Adamson’s forthcoming appearance before the TSC (should be available to view on the BBC Parliament channel) may demonstrate that this tactic isn’t going to work.

    The TSC is a largely toothless watchdog so, even if it determines that Mr Adamson failed adequately to meet his responsibilities (which it may or may not do), one wonders what, if anything, will actually happen to him. The Committee’s questioning may get bogged down in semantics over just what the FSA was or wasn’t empowered to do, with Mr Adamson arguing that whilst he would have wished to do more, he was unable to.

    Then again, I seem to recall that the FSA did indeed have powers to vet and, if it considered such action appropriate, to block senior appointments across a range of institutions. In fact, I seem also to recall that it did actually exercise this power in a number of cases (should I be wrong, I’ll stand corrected). If it did have this power and had concerns about the Co-op’s proposed appointment of Mr Flowers, why didn’t it use them? On the other hand, if it was aware that its powers in this area were inadequate, why did it not raise the issue with the Treasury and ask for those powers to be enhanced? The FSA surely had a responsibility to have done one or the other.

    Had the FSA done the latter but the Treasury took no action, then the FSA could legitimately absolve itself of blame. It’s almost as if the re-badging of the FSA as the FCA, with a few new faces at the top, was just a device to draw a line under the dysfunctional operation of the former, with the latter allowed to blame everything on the last lot on the grounds that “it didn’t happen on the FCA’s watch”. And now the FSA (if only in name) is no more, it can no longer be held to account (not that it ever was anyway).

    Whilst events such as the quite inappropriate appointment of Paul Flowers may not have happened on Mr Wheatley’s watch, given that most of the people employed by the FSA merely transferred to the FCA last April, such an excuse doesn’t really wash. It’s just more of Hector Sants’ obfuscatory tactic of shielding individuals by describing such failures as having been “collective”. What is needed is for INDIVIDUALS to be held to account.

    Then again, after 25 years of regulation this, to put it in the mildest terms, is a pretty unsatisfactory state of affairs and, once again, points to the need for an Independent Regulatory Oversight Committee with powers not just to impose sanctions against the regulator AND individuals within it when they’re found to have failed in their duties. If the regulator can reasonably demonstrate that it genuinely needs more powers in certain areas, it should be able to make representations to such a Committee, to prevent situations such as this one arising in the future. Regulation supposed to be at least as much preventative as curative and it is emphatically NOT acceptable for individuals to be let off the hook simply because the FSA has morphed into a successor body. I shall watch Tuesday’s proceedings with interest, if not with any great expectations.

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