Co-op unveils rescue plan for bank


Co-operative Bank

A rescue plan for the Co-operative's troubled banking arm has been unveiled in a bid to plug a £1.5 billion hole in its balance sheet.

No taxpayers' money will be involved in the plan, which will address the shortfall identified by the Prudential Regulation Authority (PRA), the new City watchdog, through a process where bonds are converted into shares.

The black hole in the Co-op's capital reserves largely stems from commercial property loans acquired through a merger with the Britannia building society in 2009 which created a financial ''super-mutual".

Group chief executive Euan Sutherland told the BBC Radio 4 Today programme that the bank was "asking our bondholders to contribute", and said the long-term plan was to focus on retail customers.
He added: "I think we are really strengthening the group right now and we have put in, in a very short time, a very strong management team and we have got a very clear plan to drive a very successful future for this bank going forward.

"Clearly there are lessons to learn and clearly there will be a time to look back and do that but, to be honest, in the last six weeks, where I have been involved with the Co-operative group, we have focused on driving a very solid future for this bank."

"In effect this is the best solution for all concerned," he added. "It's a very equitable solution and we believe that this will provide security, safety, stability for our customers and the bank going forward."

The PRA said it will set out further details on the capital positions of all eight major banks and building societies in a briefing on Thursday.

It launched its review after the Bank of England's new Financial Policy Committee claimed banks needed another £25 billion of capital to prop up their balance sheets.

However, Lloyds Banking Group and Royal Bank of Scotland have already agreed with the PRA that their requirements will be met without having to raise funds through the issue of new shares or securities.

© 2013 Press Association