Co-Operative Group Ltd., whose assets range from supermarkets to funeral homes, will start a review of how its banking unit accumulated a capital shortfall of 1.5 billion pounds ($2.3 billion).
Customer-owned Co-Op, whose banking unit earlier this year abandoned a bid to buy branches from Lloyds Banking Group Plc, will appoint a leader for the study soon and update its members next year, according to a person briefed on the process who asked not to be identified as the details are not yet public.
The Co-Operative Bank Plc will swap some debt for equity and sell shares on the London Stock Exchange to plug a capital hole, it said last month. It plans to raise 1 billion pounds by asking existing bondholders to exchange subordinated debt for new equity and senior debt, and a further 500 million pounds through the sale of insurance assets.
“The Co-operative Group and Bank can confirm that an independent inquiry will be set up to examine the events that led to the capital action plan announcement” on June 17, the lender said in an e-mailed statement today. “Further details will be announced in due course.”
The focus of the study will be the purchase of Britannia Building Society in 2009 and the aborted purchase earlier this year of the 632 Lloyds branches, known as Verde.
The Financial Times reported the news earlier today.
-- Editors: Simone Meier, Edward Evans