LONDON -- UK financial regulators - Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) - have begun a formal investigation into the troubled Co-operative Bank and the role of its former managers that led to its near collapse.
Both watchdogs have decided to investigate the troubled lender after UK Chancellor George Osborne announced in November that the government would launch an independent inquiry.
The investigation follows months of troubles emanating from the lender, from announcing a 1.8billion pounds ( $2.7billion) capital hole on its balance sheet to the arrest of former chairman Reverend Paul Flowers amid a drugs and orgies scandal.
The Bank of England's Prudential Regulation Authority (PRA) Monday said it is undertaking an enforcement investigation in relation to the Co-operative Bank and as part of that investigation will consider the role of former senior managers.
"No further information will be provided on the investigation until the legal process has concluded and an outcome has been reached.
"The Treasury has previously indicated that the independent review announced by the Chancellor will not start until it is clear that it will not prejudice any actions that the regulators may take. The PRA will work with the Treasury to ensure that the enforcement investigation and the independent review are sequenced appropriately."
On the 22 November 2013 the Treasury had announced it would use the powers brought in under the Financial Services Act 2012 to order an independent investigation into events at the Co-operative Bank and the circumstances surrounding them.
The Treasury set out that the independent investigation would not start until it is clear it will not prejudice any actions the relevant authorities may take, including the potential PRA and FCA enforcement investigations
The PRA and FCA had been assessing whether problems at the Co-op Bank warranted a formal probe. Both the regulators have the power to impose fines and other sanctions.
The PRA regulates banks, insurers, and investment firms. The FCA is more concerned with consumer protection.
The Co-op Bank is one of UK's smallest lenders with 6.5 million customers and a 1.5% share of the current account market. However it is a household name in Britain, as the wider group includes supermarkets, funeral services and pharmacies.
The Financial Conduct Authority (FCA) also announced an investigation, adding that its "investigation will look at the decisions and events up to June 2013".
Trouble started in May 2013,, after the Co-op Bank's head of banking Barry Tootell resigned after rating agency Moody's suggested that the British government may have to bailout the lender.
Moody's slashed the bank's debt rating to "junk" status, due to concerns that the lender had a 1.8billlion pounds black hole in its balance sheet.
On 22 November 2013, police arrested Flowers, as part of an investigation into the supply of illegal drugs. He has since been bailed.
On the same day, Chancellor George Osborne launched an independent inquiry into embattled Co-operative Bank as it is engulfed in controversy.
"The investigation has been jointly agreed with the two regulators - the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) - who agree there is a public interest in a statutory investigation," added the Treasury statement at the time.
Last month, Labour's former City minister Lord Myners was appointed to the board of the Co-op Group as senior independent director to chair a governance review.
He said at the time that the group was at a "crucial point" in its development and faced "serious challenges".
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