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| David Cameron launches two inquiries into Co-op scandal | David Cameron launches two inquiries into Co-op scandal |
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| David Cameron tried to drag Labour deeper into the turmoil engulfing the Co-operative Bank on Wednesday as he set in train two inquiries into the bank's problems and claimed Labour knew all about the past of its former chairman, the disgraced ex-Methodist minister Paul Flowers. | David Cameron tried to drag Labour deeper into the turmoil engulfing the Co-operative Bank on Wednesday as he set in train two inquiries into the bank's problems and claimed Labour knew all about the past of its former chairman, the disgraced ex-Methodist minister Paul Flowers. |
| The prime minister infuriated Labour by saying Ed Miliband should have known that Flowers was unsuitable to lead a bank. | The prime minister infuriated Labour by saying Ed Miliband should have known that Flowers was unsuitable to lead a bank. |
| Labour warned that Cameron was playing a dangerous game by turning the issue into a party-political dogfight, since there was evidence that Tory Treasury ministers encouraged the Co-op Bank to buy Lloyds branches just before a £1.5bn black hole was found in the balance sheet. | Labour warned that Cameron was playing a dangerous game by turning the issue into a party-political dogfight, since there was evidence that Tory Treasury ministers encouraged the Co-op Bank to buy Lloyds branches just before a £1.5bn black hole was found in the balance sheet. |
| The first of the two inquiries, to be conducted by the Financial Conduct Authority, is expected to be an enforcement inquiry into the conduct of Flowers and the bank. This can lead to individuals being fined or censured. | The first of the two inquiries, to be conducted by the Financial Conduct Authority, is expected to be an enforcement inquiry into the conduct of Flowers and the bank. This can lead to individuals being fined or censured. |
| The second inquiry is to be ordered by the chancellor, George Osborne, and is likely to be conducted by the Prudential Regulation Authority (PRA). It will look into the wider lessons of the Co-operative Bank's ill-judged expansion and the failure of the City regulators and the bank's board to foresee the dangers. | The second inquiry is to be ordered by the chancellor, George Osborne, and is likely to be conducted by the Prudential Regulation Authority (PRA). It will look into the wider lessons of the Co-operative Bank's ill-judged expansion and the failure of the City regulators and the bank's board to foresee the dangers. |
| The Treasury select committee chairman, Andrew Tyrie, wants this inquiry to be chaired by an independent person so that there is no danger of the financial regulators "marking their own homework". | The Treasury select committee chairman, Andrew Tyrie, wants this inquiry to be chaired by an independent person so that there is no danger of the financial regulators "marking their own homework". |
| The inquiry might take years to complete, and would be unable to start until the enforcement inquiry is complete, leaving the Co-op bogged down in official investigations for years. | The inquiry might take years to complete, and would be unable to start until the enforcement inquiry is complete, leaving the Co-op bogged down in official investigations for years. |
| It is expected that the PRA-led inquiry will pre-date 2012 and cover the period back to 2009, when the Co-op merged with the Britannia Building Society at the height of the banking crisis. The takeover contributed to the £1.5bn capital shortfall revealed at the bank earlier this year. | |
| The prime minister described Flowers as the "man who has broken a bank" following questions about his financial competence, drug-taking and resignation as a Bradford councillor over adult material on his computer. He said that Flowers had "trooped in and out of Downing Street under Labour" and was "still advising the leader of the Labour party". | The prime minister described Flowers as the "man who has broken a bank" following questions about his financial competence, drug-taking and resignation as a Bradford councillor over adult material on his computer. He said that Flowers had "trooped in and out of Downing Street under Labour" and was "still advising the leader of the Labour party". |
| Cameron added: "And yet now we know all along they knew about his past. Why did they do nothing to bring to the attention of the authorities this man who has broken a bank?" | Cameron added: "And yet now we know all along they knew about his past. Why did they do nothing to bring to the attention of the authorities this man who has broken a bank?" |
| Labour demanded that Cameron justify his claim that Labour knew about his past. | Labour demanded that Cameron justify his claim that Labour knew about his past. |
| The official inquiries are separate to a police inquiry, the investigation under way by the Treasury select committee and an internal inquiry already ordered by the Co-op Group headed by Sir Christopher Kelly, the former chairman of the committee on standards in public life. | The official inquiries are separate to a police inquiry, the investigation under way by the Treasury select committee and an internal inquiry already ordered by the Co-op Group headed by Sir Christopher Kelly, the former chairman of the committee on standards in public life. |
| But Pat McFadden, senior Labour member of the Treasury select committee, warned: "There is a real danger for the Conservative party in turning this into a party-political dogfight. The former chairman of the bank told the Treasury select committee, for instance, that Tory Treasury ministers, notably Mark Hoban, wanted the takeover of the Lloyds Bank branches and for this to happen with the Co-op. This is the story of the downfall of a bank that tried to expand too fast. Paul Flowers was undoubtedly a totally inappropriate person to run the bank, but the idea that Ed Miliband knew anything about his past is ludicrous. | But Pat McFadden, senior Labour member of the Treasury select committee, warned: "There is a real danger for the Conservative party in turning this into a party-political dogfight. The former chairman of the bank told the Treasury select committee, for instance, that Tory Treasury ministers, notably Mark Hoban, wanted the takeover of the Lloyds Bank branches and for this to happen with the Co-op. This is the story of the downfall of a bank that tried to expand too fast. Paul Flowers was undoubtedly a totally inappropriate person to run the bank, but the idea that Ed Miliband knew anything about his past is ludicrous. |
| "It is not a secret that there is a relationship between Labour and the Co-operative Movement. That is hardly a smoking gun." | "It is not a secret that there is a relationship between Labour and the Co-operative Movement. That is hardly a smoking gun." |
| Lord McFall, a member of the Banking Commission, also urged Cameron not to play politics with the bank at a time when it was still struggling to survive. Downing Street is confident that Cameron's decision to refer to the possible inquiries will not destabilise the already perilous position of the Co-op Bank, since the two American hedge funds effectively running the bank are committed to putting £125m into it. | Lord McFall, a member of the Banking Commission, also urged Cameron not to play politics with the bank at a time when it was still struggling to survive. Downing Street is confident that Cameron's decision to refer to the possible inquiries will not destabilise the already perilous position of the Co-op Bank, since the two American hedge funds effectively running the bank are committed to putting £125m into it. |
| The precise format of the inquiries is likely to be announced next week. The coalition changed the law in 2012 to give the Treasury powers to demand an investigation into troubled banks following the 2008 banking crisis when such investigations could not be formally requested. | The precise format of the inquiries is likely to be announced next week. The coalition changed the law in 2012 to give the Treasury powers to demand an investigation into troubled banks following the 2008 banking crisis when such investigations could not be formally requested. |
| The broader inquiry is likely to look into whether the FSA should have realised that the Co-op Bank takeover of the Britannia in 2009 was not advisable. It may also look to see if there was any political encouragement for this takeover by the Treasury under the control of Alistair Darling or by the then prime minister, Gordon Brown. | The broader inquiry is likely to look into whether the FSA should have realised that the Co-op Bank takeover of the Britannia in 2009 was not advisable. It may also look to see if there was any political encouragement for this takeover by the Treasury under the control of Alistair Darling or by the then prime minister, Gordon Brown. |
| David Anderson, the former chief executive of the Co-op Bank at the time of the merger with its rival Britannia building society, told the Treasury select committee this week that there had been no political involvement. | David Anderson, the former chief executive of the Co-op Bank at the time of the merger with its rival Britannia building society, told the Treasury select committee this week that there had been no political involvement. |
| Anderson, who stepped down in July 2009, told MPs that Britannia's bad real-estate loans "did not bring down the bank". | Anderson, who stepped down in July 2009, told MPs that Britannia's bad real-estate loans "did not bring down the bank". |
| Police have searched the home of Flowers, a Methodist minister who led the bank for three years, after he was filmed allegedly buying and using hard drugs, including crystal meth, crack cocaine and ketamine. | Police have searched the home of Flowers, a Methodist minister who led the bank for three years, after he was filmed allegedly buying and using hard drugs, including crystal meth, crack cocaine and ketamine. |
| The Methodist church, which suspended Flowers for three weeks on Sunday when the video of his drug purchases emerged, has now extended that exclusion. "The Rev Paul Flowers has now been suspended indefinitely as part of our complaints and discipline process. This replaces his earlier suspension." | The Methodist church, which suspended Flowers for three weeks on Sunday when the video of his drug purchases emerged, has now extended that exclusion. "The Rev Paul Flowers has now been suspended indefinitely as part of our complaints and discipline process. This replaces his earlier suspension." |
| In Bradford, Labour was trying to find out more about the circumstances of Flowers resignation as a councillor. It is understood that gay porn was found on Flowers' desktop computer in the council offices and that he was summoned to a private meeting with the then council leader, Ian Greenwood. Under the disciplinary code at the time, the worst sanction for this offence was for him to be sacked. But there was no disciplinary hearing because Flowers resigned so quickly. | In Bradford, Labour was trying to find out more about the circumstances of Flowers resignation as a councillor. It is understood that gay porn was found on Flowers' desktop computer in the council offices and that he was summoned to a private meeting with the then council leader, Ian Greenwood. Under the disciplinary code at the time, the worst sanction for this offence was for him to be sacked. But there was no disciplinary hearing because Flowers resigned so quickly. |
| Dave Green, the current leader of Bradford council, said: "As far as I know, only Ian and Paul were in the room when Paul gave his resignation, so I don't know whether he jumped or was pushed. I can't comment on a decision I didn't make or was present to hear." | Dave Green, the current leader of Bradford council, said: "As far as I know, only Ian and Paul were in the room when Paul gave his resignation, so I don't know whether he jumped or was pushed. I can't comment on a decision I didn't make or was present to hear." |
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