Robert Peston reveals that the Financial Services Authority told The Co-operative Group as early as April 2012 that the bank had too little capital to be allowed to go through with the purchase of over 600 branches from Lloyds. 

"So why did the FSA allow the Co-op Bank continue to chunter down the track towards this proposed massive expansion?

"And perhaps more importantly, since the FSA had conspicuous doubts about the Co-op Group's competence in banking, why didn't it follow up those doubts - which would have uncovered how stretched bank management really was, how an expensive IT project was going seriously awry and how vast numbers of loans were going bad?

"[... ] Did the Chancellor or the Treasury tell the FSA to make the deal happen?"

Link: 
The big Co-op question for regulators