FCA bans former Co-Op Bank chairman Paul Flowers from financial industry

The Financial Conduct Authority has banned Paul Flowers, the scandal-ridden former chairman of the Co-op Bank, from working in the financial services industry.

The City regulator said Flowers was unfit to work in the industry and that he showed disregard for legal and professional requirements as well as standards of integrity and probity.

Coming on the same day that the Treasury launched a new independent review into the prudential supervision of the Co-operative Bank between 2008 and 2013, the FCA found that Flowers used his work phone to make inappropriate calls to a premium-rate chat line and his work email to send sexually explicit messages and discuss illegal drugs. It also took into account Flowers’ conviction for possession of drugs.

Flowers, a former Methodist minister, was chairman of the Co-op Bank in 2013 when the customer-owned lender reported a £1.5bn hole in its finances that took it close to collapse. Appearing at the Treasury committee a few months later he was unable to answer basic questions about the bank’s finances.

Flowers was then filmed apparently paying for cocaine and crystal meth, earning him the nickname the “crystal Methodist”. In May 2014 he was fined £525 after pleading guilty to possession of class-A drugs. He has also admitted to paying male escorts regularly for “comfort and solace”.

Mark Steward, the FCA’s head of enforcement, said: “Mr Flowers failed in his duty to lead by example and to meet the high standards of integrity and probity demanded by the role. These high standards are what the financial services industry and the wider community rightly expect of its senior individuals. Where a chair, or other senior individual, fails to discharge these standards the FCA will hold them to account.”

Flowers earned £132,000 a year as chairman of the Co-op Bank from 2010 to 2013. The revelations about his behaviour were particularly damaging for the Co-op Bank because it claimed to have higher ethical standards than publicly quoted lenders.

The FCA said Flowers' disregard for professional standards meant any further involvement in the financial industry would harm consumer and market confidence.

After his conviction in 2014 Flowers told the BBC: “I am in company with every other human being for having my frailties and some of my fragilities exposed. Most people get through their life without that ever coming into the public domain.”

The FCA's decision on Flowers opens the way for an independent investigation into supervision of the Co-op Bank promised by the government in 2013. The Treasury has appointed Mark Zelmer, a veteran of financial regulation in Canada, to carry out the inquiry.

Zelmer will look at how the Co-op Bank was regulated with a particular focus on how it became a leading bidder for 632 Lloyds bank branches in 2013 while its finances came close to collapse. He will examine government correspondence about the bidding process.

A rival bidder for the branches accused the then chancellor, George Osborne, of favouring the Co-op Bank because of its mutual status, which was lost when it was rescued by outside investors. A Treasury committee report in October 2014 said Osborne did not try to influence the process.