The Co-operative Bank could be fined by financial regulators next month, the British lender said on Tuesday, in settlement of an 18-month investigation of actions by former management and its 2009 merger with Britannia Building Society.
The bank is trying to recover from its near-collapse in 2013, when it was hit by a yawning hole in its finances, a drugs scandal, an exodus of top executives and losses from bad commercial real estate loans. It needed to raise new capital, which has left it majority owned by bondholders including U.S. hedge funds.
Britain’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), which launched their investigation in January 2014, intend to start formal settlement discussions in July, Co-op Bank said.
“The FCA and PRA have recently indicated that their preliminary view is that they are minded to make findings against the bank, covering certain decisions, events and processes over the period from mid-2008 to end-2013,” the bank said in a statement.
The regulators have the ability to fine or publicly censure the bank. They could also fine or ban former managers. Companies typically settle within 28 days of talks to qualify for a discount on any penalty.
The senior managers under investigation have not been named by regulators.
The former chief executives of Co-op Bank and Britannia were David Anderson and Neville Richardson respectively.
An independent investigation into the circumstances that caused the lender’s near-collapse was ordered by Britain’s finance minister George Osborne in November 2013. However, that cannot begin until enforcement proceedings have concluded.
A review commissioned by Co-op Bank found the root of the problems were its Britannia takeover and poor management controls. (http://uk.reuters.com/article/2014/04/30/uk-cooperativegrp-director-idUKKBN0DG0IO20140430)
Co-op Bank was the only UK lender to fail last year’s stress tests by Britain’s financial watchdog.
It had 4.7 million customers but is cutting dozens of branches, selling assets and last year cut 15 percent of its workforce as part of its turnaround plan. ($1 = 0.6355 pounds)