The Co-operative Bank, which was put up for sale in February, has said that it is in advanced discussions with existing investors over a rescue package.
The bank said on Monday that the talks centre on a "prospective equity capital raise and liability management exercise".
The lender added that discussions are also ongoing regarding the separation of the Co-op Group pension scheme, which would clear the path for a takeover.
Reports had surfaced over the weekend that the struggling lender is close to announcing a £700 million deal that would see it dodge being wound down.
"The bank notes recent media speculation and confirms that it is in advanced discussions with a group of existing investors with a view to a prospective equity capital raise and liability management exercise," the lender said.
In March the bank, which has four million customers, said its ability to meet longer-term UK bank regulatory capital requirements has been hampered by low interest rates and higher than anticipated transformation and "conduct remediation" costs.
Co-op Bank almost collapsed in 2013 after the discovery of a £1.5 billion black hole in its finances and it was forced into a painful debt-for-equity swap. As a result, the loss-making lender is now majority controlled by US hedge funds.
The Co-operative Group owns just 20% of the bank.
The lender added: "The bank continues to fully discuss both the sale process and the capital raise options with the Prudential Regulation Authority (PRA), which has welcomed the sale and capital raise process."