The food-to-funerals group is close to appointing a senior independent figure to head the inquiry into its disastrous acquisition of Britannia Building Society and failed takeover of more than 600 Lloyds bank branches.
Last month the Co-op disclosed plans to plug the £1.5 billion capital gap by forcing bond investors, including many retail savers, to take a hit on their investment. They will be offered shares, resulting in a stock market listing for the group's banking arm.
New group chief executive Euan Sutherland commissioned the inquiry, which is expected to report back next year and in time for May's annual member meeting.
The black hole in the Co-op's capital reserves largely stems from commercial property loans acquired through the merger with Britannia in 2009. Soured loans made by the Britannia were behind almost £470 million of bad debt writedowns in 2012, which sent the group plunging to a £673.7 million loss.
The Co-op, which has around 4.7 million banking customers, is also planning to raise funds through the disposal of its insurance business, although the bulk of the rescue is coming from bondholders. The investor "bail-in" is due to happen in October.
Former HSBC executive Niall Booker has been appointed to run the Co-operative Bank, which has also ceased new business lending.
Mr Sutherland, the former B&Q boss who took over from previous chief executive Peter Marks in May, is keen to examine the circumstances around the Britannia and Lloyds deals, including the roles played by key executives. The Britannia acquisition was spearheaded by David Anderson, the former chief executive of Co-op Financial Services, and Neville Richardson, the building society's former boss who then headed the Co-op's banking arm. Mr Marks hailed the deal to buy the Lloyds branches as the "biggest shake-up in high street banking in a generation". But the Co-op pulled out in April saying it was not in members' best interests.
The inquiry will also look at whether it can claw back rewards paid to former executives. When Mr Richardson left the Co-op in 2011 he received a total payout of £4.6 million. Mr Sutherland is also conducting a strategic review into the future of the group. Founded in 1863, the Co-op group has more than six million members and employs more than 100,000 people.