Under a new rescue deal, Co-operative Group will retain 30% of the equity in Co-op Bank.
Earlier plans for a re-capitalisation of the bank were rejected by bond holders but the group now expects to meet the additional £1.5 billion Common Equity Tier 1 capital requirement with a “materially different” approach.
Co-op Bank has also made a re-assessment of provisions relating to future costs of redress for Payment Protection Insurance, arrears charges and the processing of certain mortgage interest “first payments”, increasing overall provision by £100 – £105 million.
In efforts to reassure Co-operative Group members and small investors, group chief executive, Euan Sutherland, said: “This is the first bank to be rescued and to survive as a stand alone entity without taxpayer money.”
In 2009, Co-operative Bank blundered into a merger with Britannia Building Society without having grasped the liabilities contained in Britannia’s commercial loan book, hence its struggle to survive.