Paul Flowers
Former Co-op Group\'s Chairman Paul Flowers was later found to be embroiled in a crack cocaine, crystal meth and ketamine-fuelled sex orgies (Photo: Co-Op)

Former Co-op bank boss Paul Flowers, who was arrested for illegal drug taking, has been released on bail after hours of questioning.

Flowers, 63, was arrested in Liverpool on 21 November following allegations that he had bought drugs including cannabis, crack cocaine and ketamine, and shared them with friends.

Detectives questioned the Methodist minister from 1 am to 5 pm on 22 November, according to his solicitor Andy Hollas.

Earlier, the Co-op had launched a "root and branch" investigation into how the embattled lender is run after a video emerged of its former chairman handing over money to buy hard drugs.

The 63-year-old ex-bank chief, who was in charge at the time of the Co-op's near collapse, was filmed counting out £300 in cash. The Mail on Sunday said a friend of Flowers, Stuart Davies, handed over the footage and a series of text messages.

He faced embarrassment in front of the Treasury Select Committee earlier this month after telling MPs that Co-op's assets stood at £3bn when, in fact, they were around £47bn.

The group pledged to review its "democratic structure" and stressed the need to "modernise" itself following a £1.8bn (€2.1bn, $2.7bn) black hole in its balance sheet.

"We need to modernise to ensure that the interests of all our seven million members are properly and directly represented in the oversight of our business activities," said the Co-op in a statement.

"Given the serious and wide-ranging nature of recent allegation, the new executive management team has started a fact-finding process to look into any inappropriate behaviour at the Co-operative Group or the Co-operative Bank and to take action as necessary."

Independent Inquiry

Chancellor George Osborne separately launched an independent inquiry into the embattled bank, following calls from Prime Minister David Cameron for an investigation into its bad finances and the decision to appoint Paul Flowers as chairman.

Britain's Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are considering separate investigations into the bank's mistakes and troubles.

The Co-op would close 50 branches and investors including US hedge funds would take control of 70% of its business under an ongoing rescue deal.