The Co-op Bank saved from hefty fine
(13 August 2015 – Britain) The Co-operative Bank has escaped any fines from the Financial Conduct Authority (FCA), however investigations on individuals who ran the bank are ongoing.
The Co-operative Bank stood to be given a fine of at least £120 million (A$255 million) following its collapse after a series of failures in 2013.
The bank had to be rescued by hedge funds after a £1.5 billion shortfall, this left the Co-op Group with a 20 percent stake and prompted allegations about the bank’s management, the regulation and political interference in the co-operative sector.
Since this time, the bank has worked to return to a better position.
Dennis Holt, the new chairman of Co-op bank, apologised and stressed that the findings of the FCA and the Bank of England (BOE) would not have an impact on customer relations.
Covering a period from July 2009 around the time of the Co-op bank’s deal with Britannia Building Society to December 2013, the FCA, the Prudential Regulation Authority and the BOE found the bank had not been “open and co-operative” and had a culture which prioritised the short-term financial position of the firm at the cost of long-term stability.
“Co-op Bank’s failings stand out both for the duration and seriousness of the risk management and control deficiencies uncovered.
“This was compounded by a lack of openness with their regulator,” said the Bank of England deputy governor Andrew Bailey, who runs the PRA.
The FCA found that the bank had breached the rules by saying it had enough capital in 2012 – a year in which it reported a £674 million loss – when it did not.
The loss was caused by a £474 million hit for bad loans.
The bank’s claim that it had enough capital was “false and misleading”, the FCA said in its final notice.
The FCA also said the regulator was not informed of changes to senior management between April 2012 and May 2013.
Holt said the Co-op bank had made progress in addressing the shortcomings identified by Sir Christopher Kelly, who was commissioned by the bank.
Stressing that the censure related to past events, Holt said: “On behalf of the bank, I would like again to apologise to customers for these past failings and reassure them that the bank is a significantly strong organisation today under the leadership of the current senior management team.”