Treasury sources have confirmed that the Chancellor has asked for an independent inquiry into what went on at the Co-op bank.
Exact details of its remit are still being discussed, but ITV News understands it will look at both financial and personnel issues.
That could pile pressrue on the Labour leader Ed Miliband after revelations that he had hosted a Downing Street reception attended by the disgraced former Co-op boss, Paul Flowers. Flowers was exposed by the Mail on Sunday in a sting which appeared to show him buying drugs.
Today, there were heated exchanges at Prime Minister's Questions, during which David Cameron repeatedly taunted the Labour leader over his links with Rev Flowers.
He told MPs there would be some kind of independent inquiry into how regulation apparently failed at the Co-op bank, saying: "The Chancellor will be discussing with the regulators what is the appropriate form of inquiry to get to the bottom of what went wrong here.
"But there are clearly a lot of questions that have to be answered. Why was Rev Flowers judged suitable to be chairman of a bank? Why weren't alarm bells ringing earlier, particularly by those who knew?"