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Co-op Bank secures £700m rescue deal from hedge funds Co-op Bank secures £700m rescue deal from hedge funds
(35 minutes later)
The Co-operative Group will be left with just a 1% stake in the Co-op Bank after a deal was clinched with hedge funds and other investors to pump £700m into the loss-making lender.The Co-operative Group will be left with just a 1% stake in the Co-op Bank after a deal was clinched with hedge funds and other investors to pump £700m into the loss-making lender.
The capital injection means the bank, which has 4 million customers, will continue as a standalone entity after it abandoned efforts to find a buyer.The capital injection means the bank, which has 4 million customers, will continue as a standalone entity after it abandoned efforts to find a buyer.
However, the structure of deal means that the Co-op Group of supermarkets and funeral homes that used to own the bank will be left with a 1% stake. The mutual’s stake had already fallen to 20% after previous rescue operations, the first of which was in 2013 when the scale of the problems in the bank were uncovered. However, the structure of the deal means the Co-op Group of supermarkets and funeral homes, which used to own the bank, will be left with a 1% stake. The mutual’s stake had already fallen to 20% after previous rescue operations, the first of which was in 2013 when the scale of the problems in the bank were uncovered.
The bank – which put itself up for sale in February – said that despite the tiny stake owed by the group, its “name, brand and commitment to cooperative values, set out in its ethical policy, will continue unaffected”. The bank – which put itself up for sale in February – said that despite the tiny stake owned by the group, its “name, brand and commitment to cooperative values, set out in its ethical policy, will continue unaffected”.
Dennis Holt, the Co-op Bank chairman, said: “The board is pleased to confirm this proposal for a recapitalisation which will mean that the Co-operative Bank can continue as a viable stand-alone entity, with values and ethics at its heart. Dennis Holt, the Co-op Bank chairman, said: “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.
“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.”“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 Bank of England has been closely watching the bank amid fears it may have to intervene if new capital could not be raised. The Bank of England has been closely watching the bank amid fears it might have had to intervene if new capital could not be raised.
A spokesperson for the Bank’s regulatory arm, the Prudential Regulation Authority, 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.” A spokesperson for the Bank of England’s regulatory arm, the Prudential Regulation Authority, 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.”