FCA director of supervision Clive Adamson has told MPs he has “no regrets” over approving Reverend Paul Flowers as Co-operative Bank chairman.
Speaking to the Treasury select committee today as part of its inquiry into the Co-op Bank, Adamson described Flowers as “articulate and cogent” and suitable to be a bank chairman in a robust defence of the FSA’s actions.
Flowers became Co-op Bank chair in May 2010 and stepped down in June last year after a £1.5bn capital hole was revealed.
In astonishing evidence given to the TSC inquiry in November, Flowers did not know the size of the Co-op Bank’s balance sheet or how much it was lending.
He was also arrested on drugs allegations after he was filmed buying crystal meth and crack cocaine last year.
As a result, the Co-op Bank is the subject of an Treasury-commissioned independent review, FCA and PRA enforcement investigations and three internal reviews.
Flowers was interviewed just once for an hour and a half in May 2010 by three supervisors including Adamson. Adamson was the most senior individual on the panel as FSA director of the major retail groups division.
In the hearing today, Adamson admitted Flowers did not have the technical expertise to chair a bank. He said to compensate for his lack of knowledge the FSA and Co-op Bank agreed to appoint two deputy chairmen with financial services experience to help Flowers.
Adamson also claimed there are no other examples of a bank chairman having no banking expertise. When questioned by MPs, Adamson said it could be appropriate for a nuclear power station to have a chairman with no nuclear experience or knowledge.
Adamson also dismissed Flowers’ spent conviction for gross indecency in 1981, deeming it irrelevant to his suitability.
He said: “I stand by the decision I made at the time. I was as surprised as all of us about Flowers’ apparent misdemeanours. I don’t think it was a mistake with the information I had at the time.
“The reason he was proposed was that the Co-op Bank board was 22 individuals and an unruly board, and it was important to have someone in place to better chair the board. My view was that Flowers had the competence to perform the role of non-executive bank chairman.”
Adamson he said he made the right decision at time but expressed regret over drug allegations surrounding Flowers and the troubles at the Co-op Bank.
TSC chair Andrew Tyrie described the FSA’s decision to approve Flowers as “pretty catastrophic” and “negligent”.