The capital black hole and the ‘Crystal Methodist’ Paul Flowers scandal has threatened the Co-op's existence (Photo: Reuters)
The capital black hole and the ‘Crystal Methodist’ Paul Flowers scandal has threatened the Co-op\'s existence (Photo: Reuters)

Britain's Chancellor George Osborne has revealed that his top priority in the immediate future is to save the Co-operative Bank which has been hit by a capital black hole, as well as the scandal involving "Crystal Methodist" Paul Flowers.

Osborne, who ordered an independent inquiry into the embattled lender on 22 November, said his immediate priority is saving the group.

"The first priority is to save this incredibly important bank," said Osborne.

"A huge amount of my time, and the time of the Treasury, is spent on making sure this bank survives, and survives in a way that does not depend on a taxpayer bailout, which we are on the move away from in this country."

The Co-op Bank is one of UK's smallest banks 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.

In June this year, Moody's slashed the bank's debt rating to junk status, due to concerns that the Co-operative Bank has a £1.8bn (€2.1bn, $2.7bn) black hole in its balance sheet.

The group has recently axed a number of its senior management, including ex-CEO Barry Tootell, former chairman Flowers, and most recently the executive board's leader Len Wardle.

The Co-op has been rocked by the Flowers scandal, who was found to be embroiled in a crack cocaine, crystal meth and ketamine-fuelled sex orgies.

Flowers, who has also been suspended from the Labour Party, has been arrested as part of a police drugs investigation.

The Co-op said it has now launched a "root and branch" investigation into how the embattled lender is run.

The group pledged to review its "democratic structure" and stressed the need to "modernise" itself.

"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," it said.