EX-CITY regulator the Financial Services Authority (FSA) should be probed as part of the investigation into the near-collapse of the Co-op Bank and the failed attempt to sell it TSB, MPs said in a report today.
The Treasury Select Committee also wants the whole process of auditing banks to be investigated by the Financial Reporting Council, which is probing KPMG’s audit of the bank.
The MPs investigated the failure to sell the 632 Lloyds branches – then known as Project Verde – to the Co-op Bank. After the sale fell through 18 months ago, Lloyds rebranded the branches as TSB and floated them off as a standalone bank.
One rival bidder for the branches, Lord Levene, had argued the Co-op Bank was chosen by Lloyds for political reasons, rather than commercial ones. But the MPs dismissed this, putting chancellor George Osborne in the clear.
“Each of the backstops – Co-op Bank itself, KPMG as its auditor, and the FSA as its regulator – failed to uncover the bank’s capital shortfall until it was too late. Each had a hand in this sorry tale,” said the report. “But by far the biggest responsibility lies with the Co-op Bank leadership.”