Co-op banking arm 'needs a further £400m'

The Co-op's banking arm revealed a setback to its recovery after admitting it needs to raise another £400m to cover past issues

The Co-operative Group is launching an inquiry into how it ended up with a £1.5bn black hole

The Co-op's banking arm revealed a setback to its recovery after admitting it needs to raise another £400m to cover past issues.

The business, which is set to report full-year losses of up to £1.3bn for 2013, said the matters relate to conduct and legal documentation, such as legacy PPI business and technical breaches of the Consumer Credit Act.

The Co-op Bank is now under the control of bondholders as part of last year’s refinancing to fill a £1.5bn hole in its balance sheet.

The update means the starting capital position of the bank for its four to five-year recovery is weaker than in the rescue plan announced last year, requiring shareholders to inject another £400m into the business.

Chief executive Niall Booker said: “The proposed capital raise would enable us to reset this starting point and continue with the execution of our original business plan.’’

The bank said continuing root-and-branch reviews of processes, procedures and documentation had produced further conduct and legal issues.

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