Regulator issues public censure against Co-operative Bank
A probe by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) found there had been “serious and widespread failings” in the way the lender was run from July 22 2009 and December 31 2013.
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Hide AdThe PRA found flaws in the way the lender assessed risk, potentially weakening the firm and its resilience, as well as deficiencies in failing to keep the board “apprised of key issues”.
It added the bank “had a culture which encouraged prioritising the short-term financial position of the firm at the cost of taking prudent and sustainable actions for the longer-term”.
The report also said the lender failed to deal with regulators openly and failed to notify them of “two intended personnel changes in senior positions”.
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Hide AdIt said the failings were “sufficiently serious to warrant a substantial financial penalty” but the PRA said the fine - which would have been about £120 million - would not help its aim to promote the “safety and soundness” of firms it regulates.
PRA chief executive Andrew Bailey, deputy governor of the Bank of England, said: “Firms must have in place strong controls and sound risk management as operating without them undermines safety and soundness.
“Co-op Bank’s failings stand out both for the duration and seriousness of the risk management and control deficiencies uncovered.
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Hide Ad“This was compounded by a lack of openness with their regulator. These were serious transgressions.
“The PRA has not levied a fine in this instance but, if any future enforcement investigation into Co-op Bank found serious and wide-ranging failings, this censure will be a relevant factor in determining the outcome.”
The bank nearly collapsed in 2013 after a £1.5 billion hole was discovered in its balance sheet and had to be rescued by bondholders including US hedge funds after dragging the wider Co-operative group to a £2.5 billion loss.
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Hide AdA report last year blamed the crisis on toxic loans inherited on its disastrous merger with the Britannia as well as laying bare multiple management failings.
Questions have also been raised about the appointment of Methodist minister Paul Flowers - later engulfed in a drugs scandal - as the bank’s chairman.