Co-op fallout could lead to tighter bank head checks The entire financial services industry should comply with new stricter rules governing the appointment of banking executives and directors, the City watchdog said on Tuesday as it admitted it had fallen short in vetting senior staff at the Co-operative Bank. The backing for a drastic expansion of the new "senior persons regime" which would affect tens of thousands of senior City employees came as the regulator testified over the scandal at the Co-op Bank whose disgraced former chairman, Paul Flowers, was filmed buying illegal drugs. Clive Adamson, formerly of the Financial Services Authority and now a senior director at the Financial Conduct Authority, admitted that in 2010, under the old rules, he approved Mr Flowers to be chairman of the Co-op Bank after one 90-minute interview, even though he had no banking experience and had disclosed a previous criminal conviction. Although the process for appointing senior staff has been tightened for banks, the rest of the City is still governed by the previous rule book. Mr Adamson told MPs on the Treasury committee that the regulator "would have preferred the new regime to apply to all financial services firms." Mr Adamson was the latest in a string of witnesses to appear in front of the Treasury committee to discuss the Co-op Bank's troubles following the exposure of a £1.5bn capital hole last year. He repeatedly defended his decision to wave through the appointment of Mr Flowers, who was removed from the Co-op Bank's board last summer. However he admitted the regulator had not quizzed Mr Flowers about a 1981 criminal conviction for gross indecency - which he said was irrelevant to his ability to perform the role - nor ask for any personal references. Mark Garnier, one of the MPs on the committee, said he was "absolutely stunned" that Mr Flowers was approved as chairman of the bank on the back of "an hour-and-a-half of chit-chat." Meanwhile Andrew Tyrie, chairman of the committee, accused Mr Adamson of putting a "financial illiterate" at the helm of the bank. The regulator has come under increasing pressure to explain why it authorised Mr Flowers" appointment given his lack of banking experience. Appearing in front of the Treasury committee last year, Mr Flowers estimated the size of the Co-op Bank's asset base at £3bn when it was in fact £47bn. After the hearing, David Ruffley, another committee member, predicted it would lambast the role of regulators "in this whole sorry mess which hints at regulatory dysfunction as well as gross incompetency on the part of senior executives at the Co-operative Bank." Mr Adamson said Mr Flowers" appointment was based on his ability to control the Co-op Bank's large and unruly board. He said Mr Flowers was more "articulate and cogent" in his regulatory interview than when he appeared in front of the Treasury committee. Mr Tyrie said it was "scarcely credible" that banking expertise was not a requirement for a bank chairman. Financial services firms other than banks still operate under the discredited Approved Persons Regime. That is a mistake," he said. A spokesman for the FCA said the regulator would "ensure that high standards are in place for individuals across the full range of financial services." Currently only about 20 per cent of the 27,000 firms the FCA regulates have to comply with the new rules on approving senior directors. Lawyers warned that extending that out to other financial institutions - including insurance companies, investment managers, financial advisers and brokers - would be a huge challenge. "The idea of rolling it out across the industry is not only financially impractical but also extraordinarily difficult," said one. IFAs have quite different skill sets to bank chairmen. Additional reporting by Jim Pickard