The Co-operative Group has started a fact-finding probe and a root-and-branch review of its structure after “serious and wide-ranging” allegations about the behaviour of its former banking chairman, Bradford Methodist minister Paul Flowers.

Mr Flowers, who led the Co-operative bank for three years, is the subject of a police investigation after he was reportedly caught buying and using illegal drugs including crystal meth, crack cocaine and ketamine.

The former Bradford councillor has been suspended by the Labour Party and the Methodist Church and apologised after being filmed buying the substances days after being grilled by the Treasury Select Committee over the bank’s performance.

The wider Co-operative Group said in a statement last night: “Given the serious and wide-ranging nature of recent allegations, the new executive management team has started a fact-finding process to look into any inappropriate behaviour at the Co-operative Group or the Co-operative Bank and to take action as necessary.

“In addition, the board of the Co-operative Group has launched a root and branch review of the democratic structure of the organisation.

“We need to modernise to ensure that the interests of all our seven million members are properly and directly represented in the oversight of our business activities.”

There were no further details about what if any “inappropriate behaviour” there might have been at the bank or group as a whole, or about how far back the fact-finding probe would go.

Meanwhile, the review of the group’s structure comes as chief executive Euan Sutherland – who took over in May – is already looking at how it consults members and the latest scandal is thought to have crystallised the need for action The funerals to supermarket group, which employs 100,000 people, plunged to £559 million losses in the first half of the year, weighed down by its banking arm.

In July, it appointed former Treasury mandarin Sir Christopher Kelly to head an independent investigation into what went wrong at the bank. He will report back at the mutual’s annual meeting in May.

Mr Flowers, of Great Horton, was suspended by the Labour Party yesterday.

He had been appointed to the finance and industry advisory group set up by the Labour leader, Ed Miliband.

But a Labour spokesman said: “In the light of recent reports, we have suspended Paul Flowers as a member of the Labour Party for bringing the party into disrepute.”

Asked about the situation, Labour leader Mr Miliband said: “He was involved in the Co-op and that is no longer the case. I think we will leave it there.

“You appoint people from a whole range of backgrounds to look at a whole range of issues and we have a range of business people working with us.

“The police are looking into the matter and I'm not going to comment on an ongoing investigation. Suffice to say that group no longer exists.

“We should let the police inquiry take its course.”

Mr Flowers spent nearly ten years on Bradford Council representing the Great Horton ward for Labour. He rose to become one of the most senior councillors serving on its decision-making executive before he resigned in 2011 citing his extra responsibilities as chairman of the Co-op Bank.