A SENIOR City regulator being grilled by a committee of MPs has defended his decision to approve the appointment of disgraced former Co-operative Bank chairman Paul Flowers.
Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), insisted he had not made a mistake – despite Flowers later being engulfed in a drugs scandal and being exposed for his lack of banking knowledge.
Mr Adamson said Flowers, then a Methodist minister, seemed to be the right person to control the “unruly” board at the bank, repeatedly insisting the decision to approve him was right based on the information at the time.
He said Flowers seemed to be “not the same individual” at a later meeting, before the Treasury select committee last year, when he appeared unable to answer basic financial questions about the bank.
Mr Adamson was questioned by MPs on the same committee about a 90-minute meeting he and two colleagues at the now-defunct Financial Services Authority held with Flowers ahead of his appointment in 2010.
At the meeting, it was agreed two deputies would be needed to assist Flowers as chairman because of his lack of banking knowledge.
He told the Treasury select committee: “I stand by the decision I made at the time.
“I am as surprised as all of us as to the events that surrounded Mr Flowers’ apparent misdemeanours. I don’t think it was a mistake in terms of the decision that I made at the time, with the information I had.”
The Co-operative Bank last year had to be rescued after a £1.5 billion hole was discovered in its finances. Regulators yesterday announced the launch of investigations that could see former senior managers fined or banned from working in the industry.
Committee chairman Andrew Tyrie questioned whether Flowers had been asked “straightforward questions” – of the kind asked by the committee, which exposed his lack of banking knowledge.
Mr Adamson said: “During the meeting I had with him in May 2010, just before his appointment, I did explore his experience, together with why he was being put forward by the Co-op to be the chairman.
“At that time, the reason that he was proposed to be put forward was that the board of the Co-op bank was 22 individuals. It was a somewhat unruly board and it was important that somebody was put in place and better chair that board.
“My view at the time was that Mr Flowers did have the competence to perform the role of non-executive chairman. The non-executive chairman doesn’t run the bank – the role of non-executive chairman is to run the board.”
Mr Adamson said he was surprised by the former chairman’s answers during his appearance before MPs last year and insisted that, at his own meeting with Flowers he had been “much more cogent”.
He said: “The individual that you had in front of you is not the individual I saw in 2010. He was much more articulate, more cogent. He did appear to grasp the issues around the firm at that point.”
But Mr Tyrie told him: “It is an extraordinary state of affairs that you are asking us to believe.”
He criticised the decision to put Flowers in place to oversee the board, saying: “Your solution was to put a financial illiterate in charge of it.”
Mr Adamson said he was disappointed that no-one “in public life or indeed his other associations” who may have “known more about some of his misdemeanours” ever alerted regulators.
But he admitted he had never before approved a chairman with so little experience, telling the MPs: “There was no hiding the fact that he didn’t have sufficient experience, so the decision was around how that could be mitigated.”
Mr Adamson said Flowers’ 1981 conviction for gross indecency was disclosed, but it was not considered relevant and he was not questioned about it. He said a separate drink-driving conviction was not known.