An independent inquiry into the scandal engulfing the Co-op Bank is to be launched, it was announced today.
Chancellor George Osborne has approved an investigation by financial authorities after allegations about the bank's disgraced former chairman, Paul Flowers.
Mr Flowers, 63, was arrested in Merseyside last night in connection with a "drugs supply operation", police said.
The inquiry is to be conducted by banking watchdogs the Prudential Regulation Authority and the Financial Conduct Authority, and will be led by an independent figure, the Treasury confirmed.
The investigation will not commence "until it is clear it will not prejudice any actions the relevant authorities may take", the Government said.
It will review the period from at least 2008, and will run until the present time.
The announcement follows a stream of revelations about Mr Flowers' personal and professional conduct, prompting authorities to query how he came to be in a role which saw him control a bank relied upon by millions of savers.
Disclosures since the former methodist minister was apparently filmed buying cocaine and crystal meth include a conviction for gross indecency in 1981, reportedly over a sex act in a public toilet.
He also ran up £65,000 expenses while chairing the drugs charity, Lifeline, it emerged..
Other revelations include that he was convicted of drink-driving while living rent-free in a church home.
Mr Flowers was today being questioned by detectives at a West Yorkshire police station.
