Rescue deal for Co-op Bank

Co-operative Bank has secured a £700million rescue deal with hedge fund investors in a move which spells the end of its historic relationship with Co-operative Group.

The wider Co-op Group’s stake in the bank will shrink from 20% to around 1% as part of the refinancing package, with the lender also agreeing to separate itself from the wider mutual’s pension scheme.

The Co-op said its “relationship agreement” between the group and the bank, including the promotion of lender services to members of the mutual, will “naturally fall away and come to a formal end in 2020”.

But the bank, which has 4million customers, will keep the Co-op branding and continue to keep “values and ethics at its heart”.

Majority-owned by US hedge funds, the lender put itself up for sale in February but scrapped the plans in favour of raising capital from existing investors.