The news follows the conclusion today of the FCA probe into former Co-op Bank chairman Paul Flowers who was banned from financial services for life today following his conviction for drugs and using Co-Op Bank’s email system to discuss sexual matters and illegal drugs.

Co-op Bank previously had a Financial Planning service provided in conjunction with AXA Wealth and AXA Elevate that was launched in November 2011. But this was withdrawn following a review by the bank. The Financial Planning arm was in operation during the period that will be reviewed but it is not yet clear whether this aspect will be investigated.

The bank provides a number of banking services including mortgage advice. 

The Prudential Regulation Authority has also been ordered by the Treasury to investigate the prudential regulation of the Co-operative Bank plc during the period 2008 - 2013. Mr Flowers left the bank in 2013 after his activities were exposed.

The PRA will carry out an investigation into the “actions, policies and approach” of the Financial Services Authority (the precursor to the Financial Conduct Authority), and latterly the Prudential Regulation Authority, as the institutions with statutory responsibility for the prudential supervision of the Co-op Bank during the period 2008 to 2013.

The PRA probe will focus on the questions identified by the House of Commons Treasury Committee in its 2014 report into the required divestment of 632 branches of Lloyds Banking Group, otherwise known as ‘Project Verde’, and the collapse of The Co-operative Bank’s bid for these branches.

The review of how the Co-op Bank was regulated while Mr Flowers was in charge is one of the biggest ever ordered by the government.

The independent review into the prudential supervision of the Co-operative Bank between 2008 and 2013 was announced by Economic Secretary to the Treasury John Glen today.

The review follows today’s announcement by the Financial Conduct Authority that it has now concluded its enforcement investigations into the Co-op Bank and related individuals.

The PRA has appointed Mark Zelmer to carry out the Independent review. He has over 30 years’ experience in financial services regulation and policy and is a former Deputy Superintendent of the Office of Superintendent of Financial Institutions, Canada, and previously a senior official at the Bank of Canada, International Monetary Fund, and representative on the Basel Committee on Banking Supervision and Financial Stability Board.

Economic Secretary to the Treasury John Glen said: “We are committed to creating a stronger and safer banking system. A vital part of this is ensuring that our regulatory system can learn from past events. The launch of this independent review is a further demonstration of this commitment.

“The government committed to undertake an independent investigation in 2013, once the Financial Conduct Authority’s regulatory action concluded. That regulatory action has now come to an end. The Review will look at the actions, policies and approach of the Financial Services Authority, and latterly the PRA, as the institutions with statutory responsibility for the prudential supervision of the Co-op Bank during the period in question. It will focus on the outstanding questions identified by the House of Commons Treasury Committee (TSC) in its 2014 report on Project Verde.”

The review will have full access to all relevant documents and correspondence, including the record of government contacts concerning the Lloyds “Verde” bidding process.

• Story updated 10.20am to include more information on Financial Planning arm