Following a £700 million deal, the Co-operative Group will be left with just a one percent stake in the Co-op Bank.
Despite the tiny stake owned by the group, the group has said that its “name, brand and commitment to cooperative values, set out in its ethical policy, will continue unaffected”
“The board is pleased to confirm this proposal for a recapitalisation which will mean that the Co-operative Bank can continue as a viable standalone entity, with values and ethics at its heart,” said Dennis Holt, the Co-op Bank chairman.
“It is a great outcome for our customers. Our investors share our commitment to building our distinctive ethical franchise and see strong future growth potential for the Co-operative Bank.”
The Group said that the “the relationship agreement between group and bank which covers, among other things, the promotion of bank services to members of group, will naturally fall away and come to a formal end in 2020”.
There was also a deal agreed between the trustees of the £10 billion Co-op Group pension scheme to split the retirement plan. It will be split into two legally separate parts.
A spokesperson for the Prudential Regulation Authority, the Bank of England’s regulatory arm, said: “The PRA has accepted the Co-operative Bank’s plan to build greater financial resilience. Supervisors will remain closely engaged with the bank while the actions announced today are taken forward. Implementation is subject to certain regulatory approvals.”
Dennis Holt, the Co-op bank’s chairman, said the deal was “a great outcome” for the lender’s four million customers that ensures it “can continue as a viable stand-alone entity”.
The spokesperson for the bondholders said: “We have supported the turnaround of the Co-operative Bank since 2013 and this further investment will provide the bank with the capital needed to realise its potential as the UK’s leading ethical bank.”