Former Co-op Bank chief executive admits misconduct

The Co-operative Bank’s former chief financial officer and chief executive, Barry Tootell, has reached a settlement agreement with the Institute of Chartered Accountants in England and Wales (ICAEW). Mr Tootell, who was chief operating officer and chief executive for 14 months, has admitted misconduct and agreed to be excluded from membership of the accountancy body for six years. He will also be paying £20,000 towards the Financial Reporting Council’s (FRC) Executive Counsel’s costs.

The misconduct admission arises out from the findings made by the Prudential Regulation Authority (PRA), which carried out an enforcement investigation into the Co-operative Bank. The FRC said the PRA’s findings were “conclusive evidence of misconduct”.

In January, the PRA, which is part of the Bank of England, banned Mr Tootell along with former Co-operative Banks managing director, Keith Anderson, from holding banking positions of significant influence. The PRA has also fined Mr Tootell £173,802 and Mr Alderson £88,890. The PRA found that between 2009 and 2013 Mr Tootell “did not exercise due skill, care and diligence” in carrying his role at the Bank and was involved in a short-termism culture that put at risk the Bank’s longer-term capital position. However, the PRA said that it had found no evidence of dishonesty or lack of integrity regarding the two former executives.

Commenting on the settlement, Gareth Rees QC, executive counsel to the FRC, said: “The period of exclusion imposed in this case sends a clear message to accountants of the high standards of professional conduct expected of them when undertaking important roles within business. The sanction reflects the significance of the misconduct by a CFO and CEO of a major UK bank, and the need to promote public and market confidence in the accountancy profession and the quality of corporate reporting in this sector. Mr Tootell engaged in the FRC’s settlement process by accepting his misconduct which has led to a considerable saving of time and cost.”

KPMG, the professional services firm employed by the Co-operative Bank at the time is also undergoing an investigation by the FRC. The firm handled the bank’s acquisition of the Britannia Building Society in 2009, which has been regarded as one of the reasons for the exposure of a £1.5bn capital shortfall at the bank in May 2013. The Bank appointed EY as auditor in 2014, replacing KPMG.

A spokesman at the Co-operative Bank said: “As with previous reviews of a regulatory nature, the FRC’s statement highlights serious shortcomings in the way the Bank was managed in the past and, as we have said before, the investigations by the regulators into what went wrong at the Bank are very important. They indicate the extent of the previous problems at the Bank and emphasise that the turnaround is a lengthy and difficult process.

“The findings relate to previous management and the current management team has, over the last three years, progressed the turnaround, having raised additional capital, achieved considerable de-risking, delivered mobile and digital banking capability, and strengthened the Bank’s appeal to customers.”