Remember Paul Flowers, the former Methodist minister who was once chairman of the Co-operative Bank?
Dubbed the “Crystal Methodist” because of his predilection for illegal drugs, Flowers presided over the near-collapse of the ethical bank, once one of Britain’s most respected institutions.
Now, almost five years later, the Financial Conduct Authority (FCA) has finally got round to banning Flowers from the City. He will no longer be able to "perform any function in relation to any regulated activity" in the financial services industry – not that he was likely to be offered a job by anyone anyway.
Astonishingly, the reasons set out by the regulator for his ban do not include Flowers’s part in the appalling mismanagement of the bank, which he chaired for just over three years until stepping down in June 2013. This was after the emergence of a £1.5 billion black hole, which later forced the bank to accept a rescue deal from US hedge funds.
Instead, the FCA concentrates on Flowers's misuse of his Co-op mobile phone and company email account – a move one commentator yesterday likened to "disqualifying Al Capone for tax evasion".
The £132,000-a-year Flowers used his phone on nine separate occasions in 2011 to make “inappropriate” calls to premium rate sex chatlines, in breach of the bank’s expenses policies. He was given a formal warning by the bank and made to repay the cost of the calls.
The Co-op chairman used his company email account to send and receive sexually explicit messages and to discuss illegal drugs, including cocaine, GHB and ketamine
Despite this, over the next couple of years, the Co-op chairman used his company email account to send and receive sexually explicit messages and to discuss illegal drugs, including cocaine, GHB and ketamine.
Great deal of stress
Flowers accepted that he had been in breach of the bank’s computer use policy and agreed he had been foolish. By way of explanation, he said he was under a great deal of stress and did not have a personal email account at the time.
However, he argued that he had not breached the bank’s code of conduct for directors, which he had helped draft. Not surprisingly, the regulator disagreed, and cited the former Methodist minister’s unwillingness to comply with not only its rules but also with other legal, regulatory and professional requirements.
The ruling by the FCA is largely symbolic. Of far greater interest is the independent investigation announced yesterday into the supervision of the bank in the aftermath of the financial crisis.
The inquiry is long overdue. Back in November 2013, then-chancellor, George Osborne, promised a review into the events surrounding the Co-op's financial meltdown. Now that the FCA has concluded its regulatory action, the treasury has finally asked the Prudential Regulation Authority to open its investigation, which is to be completed within a year.
It will focus on a number of issues, including the bank's disastrous merger with Britannia Building Society in 2009 and its long-running and ultimately abortive attempt to buy a block of 632 bank branches from Lloyds.
The Co-op’s disgraced former chairman will undoubtedly feature – and not just the sex and drugs shenanigans. Leaving all that aside, he was clearly utterly unqualified for his role as head of the bank, as revealed by his car-crash appearance before the treasury select committee a few months after his resignation.
In that session, Flowers was brutally exposed and shown to be almost completely clueless about the banking industry – and his own bank, which he estimated had assets of £3 billion. Incredulous MPs informed him the true figure was £47 billion.
How much of a difference might it have made if, instead of appointing Flowers chairman, the Co-op had instead recruited a credible, experienced banking professional to see it through the aftermath of the financial crisis?
And could the bank have avoided its fate if the regulators had stepped in at any point? A bit of due diligence would surely have revealed Flowers’s failings much earlier. His woeful lack of understanding of the banking industry could have been uncovered at any time and should certainly have been laid bare during the appointment process.
Neither were his personal failings that far from the surface. In 2011, for example, he was forced to step down from Bradford Council after “inappropriate but not illegal adult content” was found on a council computer he had handed in for servicing.
While they're about it, the investigators might like to ask why it has taken so long for Flowers to be banned from the City. After all, even the Methodist Church managed to dismiss him as a minister more than a year ago.
- Fiona Walsh is business editor of theguardian.com