Co-op dodges massive fines

THE Co-operative Bank is set to escape a huge fine in spite of shambolic management that led to its near-collapse two years ago, writesPeterCampbell.

The lender, which was championed by Labour as the future of banking, had to be bailed out by hedge funds after a £1.5bn black hole was discovered in its finances.

Now a two-year probe by the Bank of England and the Financial Conduct Authority has concluded.

The results, published today, are expected to say that the failings at the top of the bank were severe enough to warrant significant fines.

But, in an extraordinary move, the regulators will say that they have decided not to levy the fines – because they would harm the bank’s recovery, such is the parlous state of its finances. They will also confirm that investigations are continuing into key figures in the crisis, including disgraced former bank chairman Paul Flowers ( pictured).

The Methodist minister was last year fined £525 after pleading guilty to possessing cocaine, crystal meth and ketamine. When being questioned by MPs on the bank’s finances, he was unable to recall the scale of its balance sheet. Under his tenure, the bank came close to buying bank branches off Lloyds, but the deal fell apart after the state of its finances became clear.

Its deal with US hedge funds saw the Co-operative Group’s stake cut to just 20pc. An investigation stretching back to 2008 was launched by the FCA and Prudential Regulation Authority following the scandal.