Regulators censure Co-op for misleading investors

The troubled Co-op Bank has been censured by both the FCA and PRA for misleading investors over its capital position.

In a joint investigation with the PRA, the FCA also found the bank “fell short of its responsibility to be open with its regulators”.

In addition, the PRA has published the result of its enforcement action against the Co-op. The regulator says the firm’s “three lines of defence” risk management model was “flawed in design and operation”.

These failings occurred between 22 July 2009 and 31 December 2013.

The FCA says under normal circumstances the bank would have been hit with a “substantial” fine.

FCA acting director of enforcement and market oversight Georgina Philippou says: “Exceptional circumstances mean a public censure is the appropriate and proportionate response. It is vitally important that Co-op Bank’s capital resources are directed towards improving its resilience.”

In its financial statements for the year to 31 December 2012, published on 21 March 2013, Co-op Bank said: “Adequate capitalisation can be maintained at all times even under the most severe stress scenarios.”

In fact, from 15 January 2013 – when the regulator issued revised capital requirements – the Co-op lacked sufficient capital to meet these requirements, the FCA says.