FCA stands by decision to sanction Paul Flowers as Co-op Bank chairman

Regulator's Clive Adamson refuses to concede to MPs that appointment of now-disgraced Methodist minister was mistake

The regulator who authorised Paul Flowers'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 allow the now disgraced Methodist minister to take on the role after a 90-minute interview in 2010.

Clive Adamson, head of supervision at the Financial Conduct Authority (FCA), met with incredulity among MPs on the Treasury select committee when he initially refused to concede that the appointment of Flowers – branded a "financial illiterate" by the committee's chairman, Andrew Tyrie – had been a mistake.

Under often 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.

The 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 and questioning the merger of the bank with Britannia Building Society in 2009.

Tyrie said the regulator's decision to approve Flowers – who was exposed buying illegal drugs last year – was "a negligent decision, a very poor decision". He said Adamson's evidence exposed flaws in the so-called approved persons regime, under which officials are authorised to work in the City. "These flaws contributed to the appointment of a man with no knowledge of finance and no experience of running the board of a major corporation as the chairman of Co-op Bank in the immediate aftermath of the financial crisis," Tyrie said after the hearing.

Tyrie called for the entire approved persons regime to be torn up. "[Adamson] told us that, in the FCA's view, the reforms being applied to banks should also apply across the rest of the financial services industry," he said.

Towards the end of the two-hour hearing, Adamson eventually conceded that the appointment of Flowers – who chaired the bank from mid-2010 and left in June 2013, just as the £1.5bn capital shortfall was identified – was wrong, but said it had been the right decision at the time.

He insisted that the Flowers he authorised was a "more cogent individual" than the one who appeared before the committee last year, when the chairman was unable to give the size of the bank's balance sheet.

Adamson stressed that nothing in the rules at the time required him to interview Flowers. "I didn't think it was a mistake given the information I had at the time," Adamson said. Flowers, he said, was appointed to chair an "unruly" board of 22 individuals, and two deputies were appointed – Rodney Baker-Bates and David Davies – to counter his lack of banking knowledge.

"Do I regret what subsequently happened? Yes I do," Adamson said, conceding that Flowers would not be authorised now. Mark Garnier MP declared himself "almost speechless" after Adamson admitted 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.

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.

Baker-Bates visited Adamson in 2012 to warn that the takeover of the Lloyds branches was a "step too far", but the negotiations were allowed to carry on for another nine months before they collapsed in April 2013.

Baker-Bates "had blown the whistle", said Labour MP Pat McFadden and, along with the other vice-chairman, Davies, had voted against this so-called Verde transaction. Both have now left the board.

Adamson was also facing questions about the Co-op's merger with Britannia Building Society in 2009, which is now blamed for many of the problems at the bank but for which the FSA's authorisation was not officially required. Adamson said there was no political interference, but there had been support for the co-operative movement.

The 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. Richard Pym, chairman of Co-op Bank, said Hardie was doing a first-rate job and should not resign.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

Co-op demands £31,000 back from Paul Flowers as next payout is halted

'No further payments' for disgraced bank chairman
 Pressure mounts on Balls as Labour attacks 'smears'

The Co-operative Group last night wrote to the former chairman of its bank, Paul Flowers, to demand he return his £31,000 payoff when he left the business in June.

The 63-year-old Methodist minister, who was videoed handing over cash apparently to buy drugs, was in line to receive another £124,000. However, the Co-op said it decided last weekend, when the revelations about Flowers's private life emerged, not to make any further payments.

They were to cover his role as deputy chairman of the Co-operative Group. Flowers was elected to the position and due to remain in it until 2014.

In 2012 he was paid £132,000 to cover his role as chairman of the bank and his position on the group board. That sum also covered a company car.

Flowers, who has been suspended indefinitely by the Methodist church, resigned to take responsibility for the problems at the Co-op bank, which is racing to plug a £1.5bn shortfall in its capital identified by the Bank of the England.

The bank is urgently contacting bondholders ahead of a crucial vote next week on a deal that will leave the Co-op Group with just a 30% stake in the bank. Bondholders, led by two US hedge funds, will own the rest. Vince Cable, the business secretary, has indicated that he is ready to review the continued use of the Co-op name at the bank after the change of ownership if asked to do so.

A Department for Business spokesman said: "The secretary of state would carefully consider any representations he may receive regarding his powers under the Companies Act on the matter of company names."

The Co-op embarked on an "internal fact-finding review" after the video was released by the Mail on Sunday. It is now reviewing all emails sent and received by Flowers during his time as chairman and checking expenses he reclaimed.

Flowers apologised after the video was released, saying he had done things which were "stupid and wrong" after a death in the family and as a result of the pressures of chairing the bank. He has made no further comment since.

The Co-op said on Thursday: "When Paul Flowers relinquished his responsibilities in June, it was agreed, as per his contractual obligations, that his fees for the rest of his period of office would be paid.

"Following recent revelations, the board stopped all payments with immediate effect and no further payments will be made."

The circumstances surrounding his resignation from drug charity Lifeline Project – where he was accused of misclaiming up to £70,000 – were not known to the Co-op Group when he was named chairman of the bank in March 2010.

The political fall-out from Flowers's fall continued on Thursday. Ed Balls, the shadow chancellor, is facing renewed pressure over his links to the Co-op Bank after it emerged that he attempted to woo voters in theLabour-affiliated Co-operative party during the 2010 leadership contest by claiming that he helped pave the way for the Britannia Building Society takeover.

As the Labour leadership accused the coalition of launching a smear campaign over the party's links with the disgraced chairman, a transcript of an interview with Balls in 2010 showed that he highlighted his role in helped to create Britain's "first ever 'super-mutual'".

Balls told the Co-operative party in August 2010: "I was able to show this [my support for co-operatives] by ensuring treasury support for a new private members bill [introduced by the then Tory MP Sir John Butterfill] that led to the creation of the first ever 'super-mutual', bringing Britannia Building Society and the Co-op Bank together in the interests of customers, rather than the banking elite." A spokesman for Balls acknowledged that he supported the private member's bill but pointed out that he played no role in approving the merger in 2009 which was made on commercial grounds when he was schools secretary.

Balls said Flowers had been suspended from Labour and was "out, out, out".

Flowers resigned from the unpaid position as a trustee at the Lifeline Project in Manchester in 2004 after its chief executive Ian Wardle blew the whistle to the charity's solicitor regarding discrepancies in Flowers's expenses.

Wardle said: "These discrepancies had not been obvious and required a detailed investigation. Following legal advice from the outset from Lifeline's solicitor and further support from Queen's Counsel, the investigation continued and a process was followed to attempt to identify with the involvement of Rev Flowers, which of the expenses were reasonably incurred and which were not. The matter was fully reported to the Charity Commission."

Wardle said the charity had no record of the Co-op ever asking for a reference concerning Flowers.

The Charity Commission said Lifeline Projects had never provided any evidence that Flowers had acted in bad faith in claiming the expenses, or that he had claimed expenses incurred outside of charity business.

The commission believes that Flowers claimed under an expenses policy agreed by the Lifeline's board, which turned out to be "not in line with charity or company law and not allowed by the terms of the charity's governing document."

New management at Lifeline changed the expenses policy to make it legally compliant and asked Flowers to pay the money back. According to the charity, he never did. The Charity Commission said: "We are now writing to the charity of which the former trustee of Lifeline Projects is still a trustee to reassure ourselves that it is satisfied its governance systems are robust and there are no concerns relating to the issues raised by Lifeline Projects.

"We will also write to all of the charities of which the trustee in question has served as a trustee for the same purpose."

Flowers has stood down from the boards of the Manchester Camerata and the Terrence Higgins Trust. The trust said on Thursday that Flowers had not claimed expenses, sent emails from the trustee email address nor accessed the internet.

Article Source : http://www.guardian.co.uk
Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook