Co-op Bank faces probe by City regulator

The regulator said the probe would “consider the role of former senior managers” at the lender, which underwent a rescue last year after a £1.5bn black 
hole was discovered in its finances.

The shortfall was widely attributed to problems arising from the takeover of the Britannia building society and the failed bid to acquire more than 600 branches from Lloyds.

Questions about the management of the bank were also raised following drug revelations surrounding former bank chairman Paul Flowers.

The Financial Conduct Authority said it was also undertaking enforcement investigations into the bank, looking at “decisions and events up to June 2013”.

The PRA said no further details of its probe would be published until it had reached its conclusions.

A separate review announced by Chancellor George Osborne will not begin “until it is clear that it will not prejudice any actions that the regulators may take”.

The PRA indicated it would co-ordinate the timings of the separate probes with the Treasury.

It is the latest round of scrutiny to be faced by the bank and the wider Co-op group, and the first formal confirmation of official regulatory probes.

It is understood that investigations will look into events as far back as 2006, with a wide range of penalties available should regulators find wrongdoing, including unlimited fines.

Individuals found responsible for breaches could be declared not fit and proper to hold positions in businesses regulated by the PRA

Companies can also face fines though this is understood to be less likely in the case of the Co-op given the financial difficulties it has been facing.

Current managers are not expected to come under the spotlight in the probe.

Meanwhile, the wider Co-op Group is carrying out a fact-finding probe as well as a structure review in the wake of the allegations about Mr Flowers.

Mr Flowers, who was chairman of the Co-operative Bank for three years from 2010, had resigned as a Labour councillor in Bradford in September 2011.