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Plot thickens in Co-op drugs scandal

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An ex-FSA regulator who approved the appointment of Paul Flowers later landed a job at the Co-op Bank.

According to the Daily Mail, Graeme Hardie gave the green light to Flowers’ installment as chairman of the Co-op Bank.

Flowers was this week exposed for the alleged use of class A drugs including cocaine and crystal meth.

The newspaper reports that Flowers was a key player in choosing Hardie as a non-executive director of Co-op Bank, a role understood to pay between £30,000 and £50,000 for a few day’s work a year.

MPs last night lashed out at the FSA for allowing Flowers – who had just four years’ experience in banking between 1968 and 1972 – to take the chair at a major bank.

Treasury committee chairman Andrew Tyrie MP said the FSA’s approved persons regime – designed to weed out poor candidates – had ‘degenerated into little more than a bureaucratic box-ticking exercise’. He urged ‘radical reform’ of the process, including licences for those accepting senior banking positions.

Fellow committee member Mark Garnier MP called for regulators to give evidence about their role in the debacle.

While the FSA did not block Flowers’ appointment, the regulator was sufficiently worried that it ordered the Co-op to recruit two deputy chairmen with experience in financial services. The Co-op subsequently employed insurance industry veterans Rodney Baker-Bates and David Davies to supervise to Flowers.

All three were on the board of the bank when it was weighing up its ultimately doomed bid for Project Verde, 632 branches put up for sale by Lloyds Banking Group.

One figure with intimate knowledge of the Co-op’s board said the two men were the only directors who voted against Project Verde. They were outvoted and the bank went ahead with the deal, before pulling out when it discovered a £1.5billion black hole on its balance sheet. The Co-op said last night it had launched a ‘root-and-branch’ review of rules governing its stewardship. Prior to revelations about his private life, Flowers’ suitability was called into question when he told the Treasury committee the bank had a £3billion balance sheet when the true figure was £47billion.

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