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UK Bank Co-op Confirms Requires Additional Capital

Monday, 17 Jun 2013 | 12:45 AM ET
Pound coin
Matt Cardy | Getty Images
Pound coin

The Co-operative Group said on Monday that it had agreed a plan with Britain's financial regulator to plug a capital shortfall of 1.5 billion pounds ($2.4 billion) at its banking unit.

Co-op said it agreed a comprehensive plan to generate capital and provide stability for the Co-operative Bank . It said the plan would generate 1 billion pounds of new capital this year and 500 million pounds in 2014.

Co-op said its core tier 1 ratio, a key measure of the bank's financial strength was expected to be above 9 percent by the end of 2013 and to increase in the following years.

"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 insure its future," said Chief Executive Euan Sutherland.

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Co-op said the plan would involve an exchange offer to investors in the bank's subordinated capital securities, a capital commitment from the group, sourced from an issue of bonds and the transfer of an equity interest to bondholders.

Britain's financial regulator wants banks to achieve a core tier 1 ratio of at least 7 percent of their risk weighted assets. It said in March banks must raise 25 billion pounds of extra capital by the end of the year to absorb any future losses on loans.

The Prudential Regulation Authority said on Monday it would "hold the Co-operative to the delivery of its plans".