Scandal hit Co-operative Bank could lose the right to call itself the 'Co-op' as a result of the revelations involving former chairman Paul Flowers, Business Secretary Vince Cable told the BBC today.
Cable said he is considering whether the bank was suitable to bear the name in the wake of revelations about Flowers’ alleged drug use, including crystal meth and crack cocaine, and the adult material found on his computer as police raided his Bradford home.
Use of the word Co-operative in a company name requires approval from the Secretary of State on change of ownership, which will happen to the Co-op Bank following its recapitalisation. It will leave the Co-op Group with only a rump 30% stake, and the rest held largely by hedge funds.
News that Cable is considering taking such a step, which would be a catastrophic blow to the brand, is yet another headache for an institution facing crisis on multiple fronts.
There are growing fears about how it could hit the capital raising. Former City Minister Paul Myners has raised fears that Flowers’ alleged misconduct could threaten the process. The Treasury today declined to comment on whether it would give the go-ahead for an investigation by the Financial Conduct Authority into alleged misconduct.
The FCA can only use its new powers to probe past misdeeds with the permission of the Treasury. But officials are nervous because of the sensitivity surrounding the stricken bank’s rescue. There is also a growing clamour among MPs on the Treasury Select Committee for representatives from the FCA and the Bank of England to be hauled in to answer questions on how Flowers came to be approved as chairman.
Meanwhile, other mutuals have sought to distance themselves from the crisis amid questions about how such companies are governed in general. The Building Societies Association said: “All building societies have voluntarily signed up to the stringent UK corporate governance code, which is mandatory only for Plcs.
“As the code requires, all building society boards have a majority of non-executives. These individuals have a range of relevant skills and professional qualifications including a substantial majority with a finance, accounting, legal or general management background, plus others who are expert in areas relevant to the core business of a building society.”