MPs take aim at regulators on Co-op Bank

Tim Wallace
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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.”

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