Treasury select committee’s judgment on Co-op calamity may have consequences for regulator Clive Adamson
Hindsight is a regulator’s worst enemy. Even so, Clive Adamson, the regulator who approved the Rev Paul Flowers as chairman of the Co-op Bank in 2010, would have done better on Tuesday to say he made a straightfoward mistake. Adamson’s plea that the decision was justified given “the information I had at the time” was deeply unconvincing.
Forget about this year’s allegations of drug-taking against Flowers. Forget, too, about Flowers’ conviction in 1981 for gross indecency; the Rev volunteered the information at interview with Adamson but, given that the conviction was spent, it was fair to dismiss its relevance.
But two separate factors were most definitely relevant in 2010. First, Flowers had no senior banking experience. Given the appalling record in the crisis of banks chaired by non-bankers (Northern Rock, Royal Bank of Scotland and HBOS), a red flag should have been raised.
Second, Adamson opted for a messy arrangement that was bound to cause trouble. He decided that Flowers, despite his lacking of banking expertise, could be approved if two experienced deputy chairman were on hand. This apparent safeguard was no use to anybody. Rodney Baker-Bates and David Davies do not appear to have been told they were semi-official spies in the cab. Worse, when the two deputies warned about the dangers of the Co-op Bank’s vainglorious attempt to buy 631 branches from Lloyds, nothing happened.
Flowers’ appointment, in other words, was a muddle. If the Co-op Bank’s board was regarded in 2010 as “unruly” – Adamson’s description – the right regulatory response would have been to insist on a slimmer version under an experienced and competent chairman.
The calamity at the Co-op – it needs stating – had deeper roots than Flowers’ elevation to the chairmanship. For a start, the bank’s misguided takeover of Britannia Building Society happened in 2009. It would be quite wrong if the Rev is made the fall-guy.
But Adamson’s approval of Flowers was still “a negligent decision, a very poor decision,” as Andrew Tyrie, chairman of the Treasury select committee, put it. If that judgment is repeated in the committee’s final report, Adamson’s hold on the post of head of supervision at the Financial Conduct Authority will be extremely weak.
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