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Britain's Co-operative Bank reveals new capital hole

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(Globalpost/GlobalPost)

Britain's crisis-hit Co-operative Bank on Monday revealed that it needed another £400 million ($660 million, 480 million euros) of fresh capital to help to fill a hole in its finances.

Co-op said in a statement that it would seek the money via a sale of shares in the coming months.

The bank, which prides itself on ethical investments, said in a statement that it needed the cash for higher-than-expected compensation costs for the mis-selling of payment protection insurance on loans.

It also took a big hit from mis-selling interest rate hedging products, known as swaps, to small businesses.

In addition, the lender faced higher-than-expected restructuring costs.

"As a result of these additional costs and in order to restore the capital buffer... we intend to raise around £400 million of additional capital," the group said.

The troubled bank also warned that it expected to post a 2013 pre-tax loss of between £1.2 billion and £1.3 billion.

Monday's news comes two weeks after Euan Sutherland resigned as Co-op Group chief executive, blaming the failure to reform the governance of the mostly mutual company that runs also supermarkets and funeral parlours.

The Co-op Bank meanwhile came close to collapse last year after it was ordered by regulators to increase its capital cushion by £1.5 billion.

The bank was subsequently forced to hand control to US hedge funds in a restructuring aimed at plugging the vast black hole.

Co-op Bank slumped into fresh crisis last November after its former chairman Paul Flowers, a Methodist minister, was filmed allegedly planning to buy illegal drugs.

The bank now faces a series of investigations into what went wrong, and ongoing questions over the appointment and suitability of Flowers, who is said to have lacked knowledge of the financial sector.

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http://www.globalpost.com/dispatch/news/afp/140324/britains-co-operative-bank-reveals-new-capital-hole