The Co-operative Group said investors who bought bonds in its troubled banking arm, including US hedge funds, will be given 70% of the bank, leaving it with 30%.
The revised rescue plan aims to plug a £1.5 billion black hole in the bank's finances caused by the purchase of the Britannia Building Society and aborted plans to buy hundreds of Lloyds Bank branches.
The funerals-to-supermarkets group had initially hoped to retain control of the ethical lender by giving bond investors a minority stake in return for a £500 million loss on their debt.
But bondholders, including US hedge funds Aurelius Capital Management and Silver Point Capital, will take control of the bank under the new plan, which will see it listed on the stock market next year.
The Co-op's loss of control of the bank has raised concerns among some customers. The bank has traditionally attracted organisations like trade unions and charities because of its ethical approach.
But the Co-op said its values and ethics will be "legally embedded" in the lender's new rules.
The group announced plans to close around 50 of its 324 bank branches, about 15% of its estate, without revealing how many jobs will go among the lender's 9,000 staff.