The Co-operative Bank has taken a further hit to cover bad debts as it revealed its recapitalisation plan would be “materially different” to the one it announced in June this year.
The bank, which revealed earlier this year it had a capital shortfall of £1.5bn, said this morning it had made a “re-assessment of likely future conduct costs” and would therefore increase provisions by £100m-£105m.
“The Bank’s estimates of existing provisions relating to customer redress have been revised, with these revisions relating primarily to a change in assumptions regarding the future costs of PPI redress, arrears charges and the processing of certain mortgage interest ‘first payments’,” The Co-operative Bank said in a statement.
“An additional provision has also been made in relation to the cost of customer redress that will be required following the identification of a technical breach of the Consumer Credit Act,” it added.
The society revealed a “bail-in” recapitalisation plan in June this year to plug the £1.5bn shortfall.
Also giving an update on the plan this morning, it said: “We currently expect that many elements of any recapitalisation plan will be materially different to the outline provided on 17 June 2013, while still meeting the additional £1.5bn Common Equity Tier 1 capital requirement.
“The plan continues to evolve through the process of consultation and negotiation with bondholders, therefore we cannot provide further detail at this stage.”
The Co-operative Group has repeatedly said that its banking woes will have no impact on its food business.
Reports this morning suggested the Group was in danger of losing control of its bank after bondholders and creditors rejected the terms of its flotation plan, which would have seen the Group retain a 70% stake.
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