Nov. 19 - The Chairman of the Co-operative Group Len Wardle has resigned, days after a former Co-op bank chairman, Reverend Paul Flowers, was embroiled in a drugs scandal. As Sonia Legg reports, the scandal has raised questions about the vetting process for top bankers.
There's nothing strange about a former bank chairman counting out £20 notes. But this one is allegedly doing so to buy illegal drugs. And that's brought his former bank and the UK's financial regulators into the spotlight. The Reverend Paul Flowers was appointed Chairman for the Co-op in 2010 despite having little banking experience. Three years later the bank revealed a £1.5 billion hole in its balance sheet. Flowers was called to testify before a committee of MPs, looking at the financial crisis. And his short-comings quickly became clear. (ACTUALITY FROM SELECT COMMITTEE) ANDREW TYRIE, TREASURY SELECT COMMITTEE CHAIRMAN, SAYING (English): "What's your total asset value, roughly?" (ACTUALITY FROM SELECT COMMITTEE) PAUL FLOWERS, ANSWERING (ENGLISH): "Just over £3 billion. (ACTUALITY FROM SELECT COMMITTEE) ANDREW TYRIE, TREASURY SELECT COMMITTEE CHAIRMAN, SAYING (English): "I am talking about the assets so we are looking at the balance sheet here? He was wrong. In fact..... (ACTUALITY FROM SELECT COMMITTEE) ANDREW TYRIE, TREASURY SELECT COMMITTEE CHAIRMAN, SAYING (English): "Your total assets as of June are listed as 47 billion." The hearing took place four months after Flowers was replaced and shortly before the alleged drug incident. In a statement the former church minister said it had been an incredibly difficult year due to a death in the family and the pressures of his role with the bank. "At the lowest point, in this terrible period," he said, "I did things that were stupid and wrong." But it's the approval of Flowers' original appointment that is now raising questions. That was down to the Financial Services Authority - now the Financial Conduct Authority. MP Mark Garnier. (SOUNDBITE) (English) : MARK GARNIER, TREASURY SELECT COMMITTEE, SAYING: "One thing that was perfectly clear to us when he came before the Treasury Select Committee was that he wasn't competent to run a bank. But I think these latest personal revelations are truly remarkable and they open a whole number of other different questions about the regulators and possibly about political interference." The influence of the then Labour government is another issue. Flowers was a party member and has now been suspended. But it's the Co-op's reputation which has probably taken the biggest battering. US hedge funds are helping it plug its financial holes and it has promised a "root and branch" review of its structures. That's led to the resignation of group Chairman Len Wardle. Although no CEOs have gone, IG's Brenda Kelly says it'll still have an impact. (SOUNDBITE) (English): BRENDA KELLY, MARKET ANALYST, IG, SAYING (English): "Having a Chairman that is respected by the media and the sector itself is hugely important for shareholders and the reputation of that bank in the media." The scandal would no doubt have outraged the Co-op's founders. It was first set up in 1844 as an ethical and trustworthy co-operative. Times have certainly changed - now the bank must too.