On August 10, 2015, the Prudential Regulation Authority and Financial Conduct Authority issued final notices publicly censuring the Co-operative Bank Plc for serious risk management and transparency failings, breach of the FCA listing rules and for failing to be open and co-operative with both of the regulators. The PRA and FCA carried out a joint investigation and found serious breaches and failings in the bank’s systems between July 2009 and December 2013. The PRA focused its investigation on the bank’s risk management framework, capital management and corporate lending policies, whist the FCA focused on the bank’s publication of false and misleading information on the bank’s capital, which amounted to breaches of the listing rules. The regulators found, amongst other things, that the bank had: (i) inadequately assessed the level of risk it assumed, leading to a failure to manage that risk; (ii) mismanaged the information that it produced, leading to the bank’s Board not being familiar with key issues affecting the bank’s business; and (iii) prioritized its short-term financial position without taking reasonable and prudent actions for the longer-term. Both the FCA and PRA also noted the lack of notification to them of changes in senior management at the bank. These failings would usually trigger considerable fines however the regulators are not imposing any financial penalty, deeming it more appropriate to issue a public censure, in the interest of maintaining the safety and soundness of the firm. The regulators also took into account the turnaround plan that the bank has put in place to remedy the failings and to meet the individual capital guidance provided by regulators. The PRA would have otherwise imposed a significant fine of around £120 million on the bank.
The final notices are available at: http://www.bankofengland.co.uk/pra/Documents/supervision/enforcementnotices/en110815.pdf; and http://www.fca.org.uk/static/documents/final-notices/the-co-operative-bank-plc-2015.pdf.