The Co-operative Bank and the Reverend Flowers

How the Reverend Paul Flowers became chairman of the Co-operative bank and its dealings with Labour.

23rd. November 2013.

The Co-operative Bank’s Losses and Capital Deficits

In May of 2013, Moody’s credit rating agency downgraded the debt of the Co-operative bank to junk status.

The reason for that became apparent when in August 2013 the bank reported losses of £709 million. This came after the discovery of a £1.5 billion hole in the bank’s balance sheet in February of that year. Some £900 million of that was in respect of outstanding mortgages and loans for both household and commercial properties that were deemed to be at credible risk of default. Much of this together with as yet unquantified PPI obligations was the result of the acquisition of the Brittania Building Society in 2009.

A further £600 million represented the shortfall in their capital requirement required by regulators to ensure the safety of banks in general. This capital shortfall of £1.5 billion was almost equivalent to the Co-operative bank’s entire published capital.

The Reverend Paul Flowers 1998 -2005

He has been a long standing member of the Labour party. In 1988 he became a councillor in Rochdale. Four years later he was appointed as chairman of the drugs charity Lifeline.

While still running Lifeline Flowers again stood successfully as a councillor in 2002; this time for Bradford. Two years later he was accused by Lifeline of inappropriate use of his expenses. The matter was referred to the charity commissioners and an investigation initiated but Flowers resigned from Lifeline before it had reached its conclusions.

In 2005, when still a Bradford councillor Flowers felt it necessary to report himself to the Standards Board for England regarding a message he described as a joke that had been sent to council colleagues containing "sexual connotations"

2005 -2013

Flowers subsequently became a committee member of the United Co-operatives. Following its merger with the broader Co-operative group he was appointed to that organisation’s board. In 2010 he was appointed deputy chairman of the new group.

That same year he was also appointed as chairman of the Co-operative bank; this despite the fact that his sole experience of banking was four years working in a bank branch after he left school.

In 2011 Flowers resigned his position as a Labour councillor for Bradford. This arose from the council’s IT department that had been servicing his computer discovering that it contained “inappropriate adult content.”

On the 6th November 2013 and still as chairman of the Co-op bank, Flowers appeared before the Treasury Select Committee, where he undershot his estimate of the bank’s assets by some 90% - i.e. £4 billion as opposed to £43 billion. Eleven day later he was exposed by the Daily Mail as having procured drugs for himself and another person.

The Bank and the Labour Party

Since 2001 the Co-operative bank has donated £5,402,319 to Labour. The bank’s balance sheet discloses outstanding loans to them of £18 million at what appear to be preferential interest rates in addition to these donations. The latest loan was for £1.2 million in March 2013, which was matched by another £1.2 million from the banks sister organisation, the Unity Trust bank.

Beyond this a donation was made to shadow Chancellor Ed Balls’ office for £50,000. Details as to the purpose of this payment are as yet unclear. Flowers is currently "helping the police with their enquiries".

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