The capital infusion will be in the form of a ‘bail-in’ model, which requires bondholders to swap their debt for new bonds and equity in the bank to be listed on the London Stock Exchange. It will also give financial support for its banking business.
Co-operative Group chief executive Euan Sutherland said, "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."
As per the ‘bail-in’ strategy, the Co-op Group will provide £1bn in fresh capital this year, while remaining £500m during 2014.
The partial funding will be accumulated mainly from earnings of the disposals of insurance assets owned by the group, savings on coupon payments on Target Securities tendered in the exchange offer, among others.
The Bank Board believes that the capital and management actions will be able to generate sufficient capital to meet the bank’s current and longer-term capital requirements.
