LONDON – British regulators launched investigations Monday into the troubled Co-operative Bank, whose former chairman was filmed allegedly buying drugs in a sting by a tabloid newspaper.
Both the Prudential Regulation Authority and the Financial Conduct Authority launched enforcement investigations amid questions as to how Paul Flowers, a Methodist minister who led the bank for three years, got the job in the first place.
The Mail on Sunday’s video was allegedly shot just days after he testified before a parliamentary committee on the bank’s disastrous financial performance. Flowers failed to answer basic questions about his own bank.
The PRA, which is part of the Bank of England, did not name Flowers, but said it will consider the “role of former senior managers” in its investigation. The regulator is responsible for the safety and soundness of banks and the Co-operative Bank faces many questions in that regard after having to plug a 1.5 billion pounds ($2.4 billion) hole in its finances.
The bank reshaped its leadership in the wake of troubles that emerged from its 2009 acquisition of the Britannia Building society and its aborted interest in the purchase of some 630 branches from another U.K. lender, Lloyds Bank. The institution agreed last year to a rescue plan that saw hedge funds move in and take a huge share of its operations.
The FCA will examine whether the bank’s leaders behaved appropriately.
The two probes are in addition to a separate independent review announced by the Treasury. That independent review will take place once it is clear that it won’t prejudice any enforcement investigations by the regulators.