Chancellor orders independent investigation into Co-op
The Treasury has announced a state-led investigation into the events at the Co-operative Bank, in addition to the independent review by Sir Christopher Kelly, commissioned by the board earlier this month according to Harris & Co accountants Northampton, the specialist small business accountants.
The news follows weeks of scathing revelations drug-related accusations levelled at its former chairman Paul Flowers, whose resignation was followed by resignations of other top executives at the bank.
Sir Christopher Kelly’s review will consider several issues, including the bank’s corporate governance and accounting practices, as well as the role of its auditors KPMG.
When the Co-op’s board announced the review in its prospectus published on 4 November, it also revealed that key assurances over adequate capitalisation of the bank, especially those relating to anchor stress issues, are now considered inaccurate.
The investigation now announced by the Treasury will be led by an independent person appointed by the two regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), who agree there is a public interest in a statutory investigation.
Separately, the FCA and PRA have also announced they are both considering whether they should also launch formal enforcement investigations.
The independent investigation under the Financial Services Act will therefore not start until it is clear it will not prejudice any actions the relevant authorities may take, including the potential FCA and PRA enforcement investigations.
The detailed direction that will order the independent investigation and set out its terms will take into account any issues arising, including from this potential FCA and PRA enforcement investigations and be determined in consultation with the independent person appointed to lead it. It will cover the actions of relevant authorities (regulators and government) and the institution itself, including prudential issues, governance (including the appointment of senior staff) and acquisitions. The period that the investigation will review will start from at least 2008 and run to at least the present time.
The investigation’s report is to be presented before parliament.
News of the investigation comes amidst wider reforms of the banking regulatory regime. The government’s Banking Reform Bill, which is currently passing through the House of Lords, will introduce a new senior managers’ regime, subjecting decision makers in banks to higher standards that means if they fail in their duties they will be held to account.