AN independent Treasury inquiry into the turmoil at the Co-operative Bank, including the appointment of Paul Flowers as its chairman, was announced last night by Chancellor George Osborne.
The inquiry will cover the last five years, meaning it could produce uncomfortable findings for the last Labour Government and the current Coalition.
The move followed the arrest of Mr Flowers, a 63-year-old Methodist minister, in connection with claims he bought and used class A drugs. He was questioned by police in West Yorkshire after being arrested in Liverpool. He was bailed last night.
Amid mounting allegations about his private life, he has been suspended by the church and the Labour party, which he represented as a councillor until 2011 when "inappropriate but not illegal adult content" was found on his council computer.
Labour and the Tories have traded accusations over who was responsible for the bank coming to the brink of collapse because of a £1.5bn black hole in its finances.
The Treasury inquiry will range across how the bank ran up vast losses, its ill-fated merger with the Britannia Building Society in 2008, its failed attempt to acquire Lloyds branches seven months ago and how appointments were made to senior positions.
The probe will be led by an independent person appointed by the City regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
IIt will also consider whether there was any wrongdoing by individuals, which could lead to fines and censures.