Watchdog says it was right to approve Paul Flowers

Tim Wallace
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THE OFFICIAL who gave the green light to Paul Flowers’ appointment as Co-op Bank chairman in 2010 yesterday denied he had done anything wrong and maintained it was the right decision.

Flowers oversaw the near-collapse of the bank when regulators last year discovered a £1.5bn capital hole.

Clive Adamson admitted it was clear in his interview with Flowers in 2010 that he had no banking experience.

But the former Financial Services Authority official told MPs the main problem at the bank at the time was “a large and unruly board” which needed a strong character with experience of corporate governance to improve the way it worked.

The regulator made Flowers appoint two banking experts as his deputies to compensate for his own lack of technical knowledge. However, that backfired when Flowers and the rest of the board over-ruled those deputies to vote in favour of the ill-fated attempt to buy 632 branches from Lloyds.

“I stand by the decision I made at the time,” Adamson told the Treasury Select Committee (TSC) of MPs, though he admitted he did not take references on the candidate.

“With the benefit of hindsight, yes I do think we got it wrong, but it was the right decision at the time.”

Flowers resigned as chairman in summer 2012 after the capital problems were unveiled.

Adamson, who is now a director at the Financial Conduct Authority, said the regulator also believed the bank would be well capitalised after its merger with the Britannia Building Society, a merger which hurt the Co-op because of the Britannia’s portfolio of bad loans.

Andrew Tyrie, the MP who chairs the TSC, said more improvements are needed to the appointments process.

“Regulatory approval for those running banks now appears to include a requirement for some degree of financial expertise. It is scarcely credible that this was not already the case,” he said.

“This hearing provided further evidence, if any more were needed, of the fundamental flaws that have lain at the heart of the Approved Persons Regime and in the culture of our regulators.”