Co-op bank CFO hit with fine and exclusion
The former chief financial officer of the Co-op Bank has admitted misconduct in a settlement with the accounting regulator, and agreed to a fine and exclusion from his accountancy body.
Barry Tootell, Co-op bank’s former CFO and CEO, admitted the wrongdoing as part of a settlement with the Financial Reporting Council (FRC), and agreed to exclusion from membership of any accountancy body for six years and a £20,000 payment towards the FRC’s legal fees.
The action was taken following an investigation into the bank’s near collapse in 2013 after a £1.5bn shortfall was discovered on its balance sheet.
In January 2016 Tootell was banned for life from holding senior roles in the City and fined £173,802 by the Prudential Regulation Authority (PRA) after the Bank of England's supervisory arm found that he did not exercise due skill, care and diligence in carrying out his role.
The PRA said Tootell, who resigned from the bank in 2013, was “centrally involved” in a culture which prioritised the bank’s short-term financial position at the cost of its long-term position.
Sanction ‘reflects the significance of the misconduct’
Commenting on the recent settlement Gareth Rees QC, executive counsel to the FRC, said that the period of exclusion imposed “sends a clear message” to accountants of the high standards of professional conduct expected of them when undertaking important roles within business.
“The sanction reflects the significance of the misconduct by a CFO and CEO of a major UK bank”, continued Rees, “and the need to promote public and market confidence in the accountancy profession and the quality of corporate reporting in this sector.”
A statement from the FRC said that between 1 January 2009 and 10 May 2013, Tootell breached statement of principle 6 of the statements of principle and code of practice for approved persons, which provides that “an approved person performing an accountable function must exercise due skill, care and diligence in managing the firm for which he is responsible in his accountable function”.
Also between 22 July 2009 and 10 May 2013, Tootell failed to take reasonable care to organise and control the bank’s affairs responsibly and effectively with adequate risk management systems.
The investigation in relation to KPMG’s audit of the bank’s financial statements leading up to the exposure of the shortfall is still ongoing.
Turnaround a ‘lengthy and difficult process’
In a statement released after the settlement the Co-op Bank said: “As with previous reviews of a regulatory nature, the FRC's statement highlights serious shortcomings in the way the Bank was managed in the past and, as we have said before, the investigations by the regulators into what went wrong at the Bank are very important. They indicate the extent of the previous problems at the Bank and emphasise that the turnaround is a lengthy and difficult process.
“The findings relate to previous management and the current management team has, over the last three years, progressed the turnaround, having raised additional capital, achieved considerable de-risking, delivered mobile and digital banking capability and strengthened the Bank's appeal to customers.”