The independent review into the near collapse of the Co-operative Bank is a searing indictment of the now-defunct Financial Services Authority (FSA), Unite has said.
The Independent Review of the Prudential Supervision of The Co-operative Bank, by former Canadian central banker Mark Zelmer, said that the Co-operative Bank was left ‘relatively defenceless’ by City watchdog, the FSA, in its takeover of the Britannia Building Society in 2009.
“The conclusions make sorry reading, but the most concerning is that the FSA was broadly aware of the risks associated with Britannia’s assets when it approved the merger,” said Unite national officer for finance Rob MacGregor. “The review is a searing indictment of a catalogue of regulatory failings.”
“The FSA was clearly reluctant to pursue these financial concerns in an in-depth fashion for fear that the Co-op Bank might abandon the merger and in doing so trigger the collapse of Britannia,” he added.
“Customers and investors will be surprised that there was minimal oversight of the due diligence process, and the FSA apparently approved the merger between the Co-operative Bank and the Britannia Building Society to contain the potential risk of a major loss of confidence in the building society sector.
“A wider FSA objective was also to buttress financial stability in the UK, following the financial crash in 2008.”
Unite said that the long term consequences have been profound with thousands of jobs lost; substantial and prolonged restructuring; the separation of Co-operative Bank from the Co-operative Group; and serious reputational damage to a much-loved household brand.
MacGregor added,“In effect, these two financial organisations were allowed to get into a leaky lifeboat together, without a life jacket and were expected to make landfall with only one oar.
“It is to the Co-operative Bank’s great credit that it has survived the storm, has returned to profit and is now looking to the future in a much-recovered position.
“Unite has worked closely with the Co-op Bank throughout, and true to its heritage and long-held values, the bank has never wavered in its support for its trades unions.”
The FSA was abolished in 2013 over alleged failings during the financial crisis that rocked the global banking system five years earlier.