Six separate inquiries are now under way into the near- collapse of the Co-operative Bank, but a half-day session at the UK treasury select committee has revealed most of what we need to know about what went wrong at the once- admired mutual.
In a gruelling few hours yesterday, one of the City's most senior regulators, Clive Adamson, repeatedly refused to say the appointment of the Rev Paul Flowers as head of the bank had been a mistake.
What he said, though, was shocking: that the City watchdog at the time, the Financial Services Authority (FSA), did not ask for references from the former Methodist minister, now disgraced after an alleged drugs and rent boy scandal. It failed to check whether the Co-op group had taken up any references and, to the obvious incredulity of MPs on the committee, Adamson admitted Flowers had been approved after an interview that had lasted just 90 minutes.
This is all the more shocking, given that Adamson, a former banker, was perfectly well aware when he interviewed Flowers that he had very little expertise of the industry and was woefully lacking in the skills required to head a bank with 4.7 million customers. Indeed, Flowers’s credentials consisted of four years working at a very junior level at a bank after he left school in the 1960s.
This lack of knowledge was revealed last autumn in Flowers's now notorious appearance before the committee, during which he was unable to tell MPs what the bank's assets were, guessing
£3 billion, when the correct figure was £47 billion.
Adamson, now director of supervision at the Financial Conduct Authority, was in a senior position at the FSA when he approved Flowers's appointment in 2010.
He insisted yesterday that Flowers then was a “more cogent” individual than the one who gave such a shambolic account of himself before MPs last year.
“The individual you had in front of you was not the individual I saw in 2010,” he told the committee.
While he was aware that Flowers was “the worst of the bunch” of candidates for the job, Adamson nonetheless approved his appointment because Flowers appeared to be “on top of the concepts” and, Adamson reckoned, would be able to deal with an over-large and “unruly” board of 22 people.
The regulator was also aware of Flowers’s spent criminal conviction for gross indecency in 1981, but did not know of a second conviction in 1990, this time for drink driving.
To counter the Co-op Bank chairman’s lack of expertise, two experienced deputies were appointed. Both of these heavyweights voted against the Co-op’s failed attempt to take over a big tranche of Lloyds’ branches, warning that the bank was overstretched.
Despite that, the Co-op continued its negotiations with Lloyds for a further nine months, eating up valuable management time even as a £1.5 billion black hole was opening up in the mutual bank’s accounts after its disastrous acquisition of Britannia.
One of the deputies, Rodney Baker-Bates, went as far as sounding the alarm with the regulator, yet no action was taken, and Baker-Bates left the board shortly after.
In the meantime, the six inquiries continue, including one ordered by chancellor George Osborne, investigations by two City regulatory bodies, an internal review commissioned by the Co-op itself and a review of corporate governance by former City minister Lord Myners.
Some of these enquiries will take months or even years and will undoubtedly reveal further evidence of gross ineptitude. With the growing clamour for heads to roll, the search is on for at least one scapegoat – and after his performance in front of MPs yesterday, Anderson has already earned his place on the shortlist of scalps.
'Super Thursday' looms
Store sector followers are eagerly awaiting "Super Thursday", when a raft of Britain's leading retailers update the City on how they fared over the festive period.
The key companies to watch for tomorrow are Tesco and Marks & Spencer, both of which are expected to emerge as Christmas losers. Forecasts for M&S have been reduced once again, after it resorted to heavy price-cutting just days before Christmas.
M&S and its embattled chief executive Marc Bolland may be able to avoid the humiliation of issuing a formal profits warning, as the group is adept at pulling cost savings out of the bag to put a gloss on its poor performance. But there's a limit to how much savings can disguise.
Fiona Walsh is business editor of theguardian.com
