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FCA stands by decision to sanction Paul Flowers as Co-op Bank chairman FCA stands by decision to sanction Paul Flowers as Co-op Bank chairman
(about 2 hours later)
The regulator which authorised Paul Flower's appointment as chairman of the Co-operative Bank insisted he stood by the decision to sanction the now-disgraced Methodist minister to take on the role. The regulator who authorised Paul Flower's appointment as chairman of the Co-operative Bank faced intense criticism from MPs on Tuesday after he insisted he stood by the decision to sanction the now-disgraced Methodist minister to take on the role.
Clive Adamson, currently head of supervision at the Financial Conduct Authority, was greeted with incredulity by MPs on the Treasury select committee when he refused to concede the appointment of Flowers in 2010 had been a mistake. Clive Adamson, currently head of supervision at the Financial Conduct Authority, was greeted with incredulity by MPs on the Treasury select committee when he refused to concede the appointment of Flowers – branded a "financial illiterate" by the committee's chairman Andrew Tyrie – had been a mistake.
Under hostile questioning, Adamson was asked if he and others were right to stay at the regulator. "You clearly did get it terribly wrong," he was told by Andrea Leadsom MP. Under hostile questioning, Adamson was asked if he and others were right to stay at the regulator which has taken over from the Financial Services Authority. "You clearly did get it terribly wrong," he was told by Andrea Leadsom MP. Adamson, a former banker who became a regulator following the Northern Rock crisis, insisted he should stay in his role.
Co-op Bank is now 70% owned by its bondholders, led by US hedge funds, and only 30% by the mutually owned Co-op Group of supermarkets, pharmacies and funeral homes after a rescue operation to inject £1.5bn into the bank. The committee is examining the aborted attempt by the Co-op to take over 631 Lloyds Banking Group branches last year. Co-op Bank is now 70% owned by its bondholders, led by US hedge funds, and only 30% by the mutually owned Co-op Group of supermarkets, pharmacies and funeral homes after a rescue operation to inject £1.5bn into the bank. The committee is examining the aborted attempt by the Co-op to take over 631 Lloyds Banking Group branches last year and also questioning the merger of the bank with the Britannia Building Society in 2009 – a deal Adamson approved.
Adamson said Flowers, who chaired the bank from mid-2010 and left in June 2013 just as the £1.5bn capital shortfall was identified, was a "more cogent individual" than the one who appeared before the committee last year, when he failed to identify the size of the bank's balance sheet. Tyrie described the events at the Co-op as a "road accident" and told Adamson the decision to approve Flowers was "a negligent decision, a very poor decision".
Andrew Tyrie, the Conservative MP who chairs the committee, described the events as a "road accident" and told Adamson the decision to approve Flowers was "a negligent decision, a very poor decision". He said Flowers, who chaired the bank from mid-2010 and left in June 2013 just as the £1.5bn capital shortfall was identified, was a "more cogent individual" than the one who appeared before the committee last year, when he failed to identify the size of the bank's balance sheet.
The regulator expressed disappointment that none of the other bodies where Flowers had roles came forward to express reservations about the minister who was exposed allegedly buying illegal drugs last year. "I didn't think it was a mistake given the information I had at the time," said Adamson, when asked about the authorisation of Flowers. He wanted Flowers to chair an "unruly" board of 22 individuals which was eventually reduced to 14.
"I didn't think it was a mistake given the information I had at the time," said Adamson, who wanted Flowers to chair an "unruly" board of 22 individuals.
"My view at the time was that Mr Flowers did have the competence to perform the role of non-executive chairman," said Adamson."My view at the time was that Mr Flowers did have the competence to perform the role of non-executive chairman," said Adamson.
Sitting in the public area of the committee room was Lord Myners, who was last month appointed as a non-executive the Co-op Group and will head the review of its governance. As Myners looked on, Adamson said: "I stand by the decision." The regulator expressed disappointment that none of the other bodies where Flowers had roles came forward to express reservations about the minister who was exposed allegedly buying illegal drugs last year.
However, Adamson said that he had required two non-executive deputy chairman to be appointed as Flowers had been the "worst of the bunch" in terms of experience about banking. But Adamson left MP Mark Garnier "almost speechless" after admitting Flowers had been approved after an hour-and-a-half interview and without his references being taken up. Flowers had disclosed a spent conviction for gross indecency from 1981 but it was not deemed relevant. "We had to be very careful not to draw inferences from people's private lives into their professional lives," said Adamson.
Sitting in the public area of the committee room was Lord Myners, who was last month appointed as a non-executive of the Co-op Group and will head the review of its governance. As Myners looked on, Adamson said: "I stand by the decision" to appoint Flowers
However, Adamson said that he had required two non-executive deputy chairmen to be appointed as Flowers had no experience of banking.
"Today he wouldn't be approved," added Adamson, as the process is tougher and now requires financial services experience to chair a bank."Today he wouldn't be approved," added Adamson, as the process is tougher and now requires financial services experience to chair a bank.
"Do I regret what subsequently happened? Yes I do," Adamson said."Do I regret what subsequently happened? Yes I do," Adamson said.
"I accept complete responsibility for decisions made under my watch.""I accept complete responsibility for decisions made under my watch."
The regulator had been aware of a spent conviction for gross indecency for Flowers from 1981 but that it was not deemed relevant. "We had to be very careful not to draw inferences from people's private lives into their professional lives," said Adamson.
He revealed that Rodney Baker-Bates, one of the two deputy chairmen appointed to support Flowers, had visited him in 2012 to warn that the takeover of 631 Lloyds Banking Group branches was a "step too far". The negotiations were allowed to carry on for another nine months before they collapsed in April 2013.He revealed that Rodney Baker-Bates, one of the two deputy chairmen appointed to support Flowers, had visited him in 2012 to warn that the takeover of 631 Lloyds Banking Group branches was a "step too far". The negotiations were allowed to carry on for another nine months before they collapsed in April 2013.
Adamson confirmed Baker-Bates and the other vice-chairman, David Davies, had voted against this so-called Verde transaction. Both have now left the board. Baker-Bates "had blown the whistle" said Labour MP Pat McFadden and along with the other vice-chairman, David Davies, had voted against this so-called Verde transaction. Both have now left the board.
He was also facing questions about the approval granted to Co-op to merge with Britannia Building Society in 2009 which is now blamed for much of the problems at the bank. Adamson said there was no political interference but had been support for the co-operative movement. Adamson was also facing questions about the approval granted to Co-op to merge with Britannia Building Society in 2009 which is now blamed for much of the problems at the bank. Adamson said there was no political interference but had been support for the co-operative movement.
The continued tenure of Graeme Hardie as a non-executive director on the Co-op board was also questioned after he took the role despite having been involved in approving Flowers' position as chairman when he was an adviser to the regulator.
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