Britain’s “ethical” Co-operative Bank has slumped further into crisis after its former chairman was filmed allegedly planning to buy illegal drugs, while further revelations surrounded his sex life.

Paul Flowers, a Methodist minister, apologised after The Mail on Sunday tabloid published allegations involving crystal meth, crack cocaine and ketamine.

The damaging revelations sparked the resignation on Tuesday of Len Wardle, the current chairman of parent firm the Co-operative Group and who led the board that appointed Flowers three years ago.

He will be replaced by his deputy Ursula Lidbetter.

The Sun newspaper meanwhile alleged that Flowers, 63, had used his Co-operative email account to set up drug-fuelled gay sex sessions with rent boys.

Wardle said in a statement on Tuesday that it was “right” to step down because he had led the board that appointed Flowers in 2010 to chair the bank, which prides itself on its ethical investment policy.

The Mail on Sunday alleged over the weekend that Flowers was caught on camera discussing the purchase of illegal substances.

The paper said the event occurred just days after he had bungled an appearance before MPs on parliament’s Treasury Select Committee to explain its dire finances.

At his appearance on November 6, Flowers said that the Co-operative Bank’s balance sheet had STG3.0 billion ($A5.19 billion) of assets when in fact the figure was STG47 billion.

He also appeared confused about its loans and investments.

The scandal further damages the bank’s reputation, two weeks after it was forced to hand control to US hedge funds to plug a STG1.5-billion black hole.

Flowers has apologised in a statement issued through the Methodist Church in Britain, blaming pressures in his personal life.

Flowers has been suspended from the Methodist Church and, as a former local political councillor, also suspended from the Labour Party.