Former Co-op Bank execs banned from future financial roles

Two former executives of the Co-operative Bank have been barred for life from holding banking positions of significant influence. The Prudential Regulation Authority (PRA) has banned former chief executive Barry Tootell and former managing director Keith Alderson for breaches related to the running of the bank, at a time when it was still a subsidiary of the Co-operative Group.

The PRA, which is part of the Bank of England, has also fined Mr Tootell £173,802 and Mr Alderson £88,890. The decision follows the PRA’s enforcement investigation into the Co-operative Bank, which found there were “serious and wide-ranging failings in Co-op Bank’s control and risk management framework” during the period from 22 July 2009 to 31 December 2013. In August 2015, the bank avoided a fine from the PRA due to “exceptional circumstances”, but was reprimanded for rule breaches, management failures and risk defence flaws.

The PRA found that between 2009 and 2013 Mr Tootell did not exercise due skill, care and diligence in carrying his role at the Co-operative Bank. The financial services regulatory body concluded that he was involved in a culture within the organisation that encouraged prioritising the short-term financial position of the firm at the cost of securing its longer-term capital position.

“The PRA also finds that, from 1 August 2009 (the date of the merger with Britannia) until 1 October 2012, Mr Tootell did not take adequate steps to ensure that the Co-op banking risk team, for which he was ultimately responsible, was properly structured and organised to enable it to provide proper independent challenge and guidance to the first line business of the Co-op Bank,” reads the PRA’s statement.

The financial regulator said Mr Alderson had failed to take “reasonable steps” to ensure the bank adequately assessed risk arising across the Britannia corporate loan book. This meant that the risks could not be properly considered nor could appropriate actions be taken to mitigate them, argued the PRA. It added that Mr Alderson had not intentionally placed any member of the Co-op Bank’s staff under pressure to modify impairment figures, but that on some occasions, his challenge had led to the result of a more optimistic view on the impairment position of the bank.

However, the PRA said it had found no evidence of dishonesty or lack of integrity regarding the two former executives.

Andrew Bailey, deputy governor, prudential regulation, Bank of England and chief executive of the PRA said: “Banks that are not well governed have the potential to pose a threat to UK financial stability. The actions of Mr Tootell and Mr Alderson posed an unacceptable threat to the safety and soundness of the Co-op Bank which is why we have decided a prohibition is appropriate in these cases.

“This action makes clear that there are serious consequences for senior individuals who fall short of the PRA’s expectations. The new senior managers regime, which will be introduced in March, will further ensure that senior managers are held duly responsible for their actions.”