Co-op unveils plans to plug capital shortfall - Banking - News - Moneyfacts


Co-op unveils plans to plug capital shortfall

Co-op unveils plans to plug capital shortfall

Category: Banking

Updated: 17/06/2013
First Published: 17/06/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Comprehensive plans have been announced today as to how The Co-operative Bank will fill its capital shortfall.

Following a review of it capital position and confirmation by the financial regulator, the Prudential Regulation Authority (PRA), that the bank had a "black hole" of £1.5 billion, the Co-operative Group stated that it would be taking action to "generate capital and provide stability".

Unlike rescue plans carried out at the height of the credit crisis, which relied on help from taxpayers, The Co-operative Bank will instead raise capital via a 'bail in' process, whereby shares in the bank will be offered to existing bondholders. Shares will also be listed on the stock market.

The Co-operative Group, the bank's parent company, is also expected to provide extra capital to help make up the shortfall.

Concerns about the bank's capital position have been widespread since the ratings agency, Moody's, downgraded its debt rating to 'junk status' in May this year.

In a statement, the chief executive of The Co-operative Group, Euan Sutherland, declared: "We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the Bank. In doing, so we have agreed a plan to ensure its future.

"We have discussed this plan in full with the regulator. The Co-operative Group, which clearly regards the Bank as a core part of the Group, is providing extra capital. Investors in the Bank's subordinated capital securities are also being asked to support the Bank at this crucial time by participating in a wider exchange offer.

"This solution, under which they will own a significant minority stake in the Bank, will then allow them to share in the upside of the transformation of the Bank," he said.

What next?

Find out how to choose the best bank account by reading our guides to help you open and manage your bank account
Compare the best savings rates

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

More people are switching current accounts

Competition in the current account market remains intense, which means if you’re not happy with your account for any reason, now’s a great time to switch! Happily, more and more people seem to be getting in on the switching action...

Financial services complaints continue to fall

Many people feel dissatisfied with their financial providers at times, but happily, it looks as though the most serious complaints are becoming less and less common.

Contactless spending hits yet another record

Contactless spending is going from strength to strength, hitting new records on a seemingly monthly basis - and it’s just broken yet another one, with monthly contactless spending having passed the £2bn mark for the first time.