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FCA confirms investigation of Co-operative Bank

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  • 06/01/2014
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FCA confirms investigation of Co-operative Bank
The Financial Conduct Authority (FCA) has confirmed it will be undertaking enforcement investigations into ‘events' at the Co-operative Bank up to June 2013.

The independent review announced by the Chancellor will commence once it is clear that it will not prejudice any actions that the regulators may take.

The FCA said: “This sequencing is necessary to ensure that the outcomes of the enforcement work are not prejudiced and follows the approach taken for both the RBS and HBOS reports.”

The troubled lender was embroiled in several other scandals last year.

In the Summer, the regulator revealed Co-op Bank faced a £1.5bn capital shortfall, prompting a restructure of the organisation. Under the original rescue plan Co-op Group would have retained a stake of around 70% in the bank after floatation on the stock exchange but this figure was lowered to 30% after discussions with creditors.

In October, the Co-operative Group laid out plans for an emergency restructure giving it a 30% stake in the struggling Co-op Bank, with 70% given to hedge funds and other creditors.

Auditor KPMG also admitted ahead of the lender’s purchase of Britannia Building Society it had not been given full access to its loss-making corporate loan book during due diligence of the lender on behalf of the Co-operative Bank, it emerged.

In a Treasury Select Committee session, partners from KPMG told MPs that the Co-op initially asked the accountancy firm to examine this part of the business in detail before the 2009 takeover. This was blocked by Britannia and the matter ended there.

In November, revelations that group chairman Paul Flowers had binged on drugs, prompted a couple of top-level resignations including Paul Flowers himself and Len Wardle, the group chair, who retired early after accepting responsibility for appointing Flowers.

Wardle added the Co-op needed to change its operations and governance: “I hope that the Group now takes the chance to put in place a new democratic structure so we can modernise in the interests of all our members.”

The group board was also conducting a root and branch review of the structure of the organisation, it added.

 

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