Following the banning of Paul Flowers, former Chair of Co-operative Bank, from the financial services industry, the Treasury has directed the Prudential Regulation Authority (PRA) to conduct an investigation into the bank’s collapse. Chair of the Treasury Committee, Nick Morgan, has welcomed the “hugely overdue” review and has asked for it to be completed in good time.
While she lamented the fact that the original review had not started in 2013 as planned, she said she was confident that a forensic examination of the circumstances of Co-op Bank’s failure will no doubt yield important lessons for the financial regulators.
The bank reported its fifth consecutive year of losses earlier this week but also that performance had improved in the second half of 2017. There was a loss over the year of £174.4 million, down from £477.1 million in 2016.
The review will cover key events, such as the withdrawal from the Project Verde deal to buy Lloyds branches in 2013 and it will also look at the impact of IT on the Bank’s operations, specifically whether the regulator was made aware of the change in the accounting treatment of the cost of replacing its IT platform in 2010.
The PRA has appointed Mark Zelmer to carry out the review and he is charged with reviewing all relevant documents and correspondence, including the record of government contacts concerning the Lloyds ‘Verde’ bidding process.
As is normal in a forensic investigation, all the evidence will be gone through by forensic accountants and interviews will be conducted with key stakeholders.