Former Co-operative Bank chairman Paul Flowers says he came under sustained Treasury pressure to buy Lloyds Banking Group branches.
Speaking to BBC Newsnight yesterday, Reverend Flowers said he was called two or three times a week by former Treasury financial secretary Mark Hoban to check on the progress of a deal.
In April 2013 the Co-op Bank pulled out of a deal to buy 632 Lloyds Banking Group branches after it uncovered a £1.5bn capital black hole.
In a wide-ranging interview, Flowers said the FSA approval process was easier than expected, lashed out at the Treasury select committee and said banking has been overcome by “avarice and greed”.
Flowers said: “We came under considerable pressure from the present Government, mainly from Conservatives. They wanted a deal.
“There was pressure certainly from Mark Hoban but I know that originated much higher up from the Chancellor himself.
“There were regular calls, regular checks about whether we were progressing well – and I mean two or three calls a week from the junior minister. They wanted a deal done, they might deny it now but that is what they wanted.”
Reverend Flowers, who was an economic adviser to Labour, quit the bank last June and many have questioned why he was appointed with no banking experience.
He defended his appointment claiming he was the unanimous choice of the bank board, group board and FSA.
Flowers was interviewed just once by the FSA for one and a half hours by three supervisors including FCA director of supervision Clive Adamson. Adamson was the most senior individual on the panel as FSA director of the major retail groups division.
Flowers described the process as easier than his preparations and a “really wonderful conversation on philosophy and ethics”. He was hired in May 2010.
Treasury select committee chair Andrew Tyrie has described the FSA’s decision to approve Flowers as “pretty catastrophic” and “negligent”.
Flowers appeared in front of the TSC last November but left MPs in shock when he did not know the size of the bank’s balance sheet.
He said: “I was ill-prepared and not ready for all the questions. In particular I was put off a tad by the aggression of some of the members of that committee, and the clear attempts some were making not to ask sensible or rational questions but to trip me up and to engage in political point-scoring.”
In November Flowers was arrested after allegations that he bought crack cocaine and crystal meth and has since spent a month in hospital for addiction. Flowers refused to deny in the Newsnight interview he had used drugs while chairman of the bank.
The Co-op Bank is the subject of an Treasury-commissioned independent review, FCA and PRA enforcement investigations and three internal reviews.
A Treasury spokesman says: “The selection of the Co-op and the decision on whether to proceed with the Verde deal was a purely commercial matter for Lloyds Bank and the Co-op Bank, as the chairman and chief executive of Lloyds have consistently made clear.
“Since the full extent of the situation at Co-op Bank became clear, the Chancellor has ordered an independent investigation into the events at the Co-op Bank and the circumstances surrounding them.”