Co-operative Bank close to sealing rescue deal with Prudential Regulation Authority

George Osborne is expected to announce the deal soon.

New Statesman
Photograph: Getty Images.

The Co-operative Bank is close to striking a deal with the Bank of England’s new banking regulator Prudential Regulation Authority (PRA) to address its capital shortfall of up to £1.5bn.

The British chancellor of exchequer George Osborne is expected to announce the deal soon.

The move comes at a point when the British government is considering to sell its stakes in Lloyds Banking Group and Royal Bank of Scotland (RBS).

Both the bank and the PRA were in discussions for the last six months, following the downgrade of the bank’s credit rating by Moody’s for failure to acquire 632 branches of Lloyds.

The deal, which is expected to affect the bank’s 5,000 small investors, could include already revealed sale of the Co-operative Group’s insurance and asset management businesses and a proposal to exchange the bank’s £1.3bn of debt into new instruments.

Earlier this year, the Co-operative Group sold its life insurance and asset management businesses to the UK-based mutual life and pensions provider Royal London for £219m.

The bank is also planning to sell its non-core assets.