Co-op drugs scandal: two inquiries launched by Cameron as party leaders get personal

David Cameron has launched two inquiries into the Co-operative Bank following the drugs scandal surrounding its former chairman, Paul Flowers, in a move doubtless designed to drag Labour through the muck of the scandal.

Labour received more than £18m in “soft” loans from the Co-op Bank, and Flowers was a Labour councillor in Bradford.

The Prime Minister has alleged that Labour knew about Flowers’ “past” before the scandal surfaced, and challenged Labour on why he had been allowed to be chairman of the bank.

Cameron said in the Commons: “Why was Reverend Flowers judged suitable to be chairman of a bank? Why weren’t alarm bells rung earlier, particularly by those who knew?”

Ed Miliband has defended his party again the PM’s challenges, saying Labour has always acted with the “utmost integrity”.

In the Commons, Miliband hit back at Cameron over the people the PM “associates with”.

Miliband has said there is evidence the Conservatives supported and encouraged the Co-op Bank’s acquisition of Lloyds branches ahead of a £1.5bn balance sheet black hole being revealed.

The Labour leader also told ITV News: “Paul Flowers was somebody who I met with on one occasion and had meetings with a wider group on a couple of other occasions. He was never my close adviser.”

The first inquiry will be conducted by the Finance Conduct Authority, and is expected to look at the bank’s and Flowers’ conduct.

The second inquiry will probably be conducted by the Prudential Regulation Authority and examine the Co-op Bank’s misguided expansion and the failing of financial regulators.

Follow me @LondonlovesBiz and @sophiehobson