The watchdogs are right not to kick the Co-op when it's so far down

Outlook

So now we know: if you want to avoid getting fined by the regulators, just make sure you do so much damage to your business that it can’t afford to pay.

The City regulators’ report into Co-op Bank is a scathing exposé of managerial incompetence.

Risk management was practically non-existent; prudent, long-term accounting evaporated; and the business failed so abysmally to communicate up the management chain that the board had no idea of how bad things were.

Perhaps the worst example is the way it magically added nearly half a billion pounds to the solvency of the proposed Co-op/Britannia group, weeks before the 2009 merger. It achieved this by conducting an extremely aggressive accounting trick with Britannia’s 25-year bonds.

The true impact of this move was so bad that the Co-op could have backed out of the merger at the last minute under the “material adverse change” rules. But, sadly, the board was kept in the dark and the most disastrous assault on the co-operative movement went ahead.

There will be some who are angered by the lack of a financial penalty, but the regulators are right: why stamp on the Co-op’s windpipe while its new management breathes it back into life? Those baying for blood must look to the individual managers who caused the mess. Regulators’ investigations into that shameful crew should be published soon.