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FRC making inquiries at Co-op bank

The UK Financial Regulatory Council (FRC) has confirmed it is making enquiries about the Co-Operative Bank's (Co-op) 2012 accounts, though it is yet to begin a formal investigation.

The FRC said it ordinarily only comments on investigations when they are formally announced, however the watchdog confirmed it is "making enquiries into the Co-op's financial reporting in accordance with our normal procedures and under the terms of the Accountancy Scheme".

"These enquiries relate to the disclosure in the 2012 annual report and accounts of the bank's regulatory capital position. They also relate to the bank's loan impairment, impairment of its investment in its replacement banking IT platform, and to fair value disclosures."

Co-op Bank has been suffering losses largely caused by its 2009 takeover of Britannia Building Society. In the first six months of 2013, the bank lost £781m after tax.

As well as these substantial loses, the bank has faced a torrid 2013, with former chairman, Paul Flowers getting caught up in a series of compromising scandals.

KPMG, the bank's auditor, had reported in August that it had "significant doubts" over its ability to remain a going concern unless it was able to agree a £1.5bn rescue plan with its bondholder. The plan involved the Co-op Group contributing $1bn and the bank's bondholders contributing £500m.

If the deal is voted through, hedge fund collective LT2 will take control of the bank, with current owner Co-op group retaining a 30% stake.

KPMG said that its audit's of Co-op were robust and followed professional standards.

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