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‘No regrets’: FCA defends approval of ex-Co-op chair Paul Flowers

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 this week, Adamson described Flowers as “articulate and cogent” and suitable to be a bank chairman.

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, who was then FSA director of the major retail groups division.

In the hearing, Adamson admitted Flowers did not have the technical expertise to chair a bank and the Co-op appointed two experienced deputies to compensate. 

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.”

TSC chair Andrew Tyrie described the FSA’s decision to approve Flowers as “pretty catastrophic” and “negligent”.

Banking consultant Mehrdad Youseffi says: “The FSA should have asked more questions about Flowers’ ability to perform the role by speaking to people in the business community.”

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  1. It occurs to me to recall the excessively aggressive lending policy that led to the downfall of Northern Rock ~ now more than 5 years ago ~ under the leadership of Adam Applegarth, who freely confessed to having no experience of managing a bank. So on what basis was HIS appointment approved by the regulator of the day?

    Thus, not only was approval of the appointment of Paul Flowers as chairman of the Co-op badly misjudged because the FSA wasn’t fully and properly acquainted with the necessary information but it appears to have been a repeat of the approval of Adam Applegarth to be Chief Exec of Northern Rock. Did the FSA learn no lessons from its first error of judgement?

    And, were the FCA standing in judgement over such a flawed decision on the part of one the organisations it regulates, would it allow the relevant parties to escape punishment? As far as Mr Adamson’s appearance before the TSC is concerned, all he’s done is to claim that, with the same facts before him now, he’d make the same [wrong] decision all over again. The real issue, though, is that he failed to ensure he had to hand all the necessary facts in the first place.

    Given that the TSC has no powers to do anything about it, isn’t such questioning barely more than a hollow charade of calling the regulator to account? If nothing actually happens when the TSC isn’t convinced by or satisfied with the responses it receives, then whatever is the point?

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