Co-op Bank says customers are switching away

Troubled lender Co-operative Bank has admitted that it is losing customers as its reputation takes a battering following its financial woes and the scandal involving former chairman Paul Flowers.

The bank is now facing a full independent inquiry into its near-downfall. Picture: Getty

The mutual, which is trying to plug a £1.5 billion black hole in its finances, also said a lack of marketing activity, combined with a scheme that makes it easier for people to move current accounts, may be a “contributing factor” as people switch to rival banks.

However, Co-op said savers were so far sticking with the group, with its retail deposits remaining stable.

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Flowers, a Methodist minister, stepped down in June and has been bailed after being questioned by police officers investigating allegations of drug supply offences.

The bank is now facing a full independent inquiry into its near-downfall, ordered by Chancellor George Osborne, while the Prudential Regulation Authority and Financial Conduct Authority are also considering an investigation.

Yesterday’s update was included in a statement that detailed changes to its rescue deal that will see bondholders take a 70 per cent stake in the bank, leaving the Co-operative Group with just 30 per cent.

Bondholders were originally due to get 45 per cent of the lender in exchange for their debt, and another 25 per cent by buying ordinary shares for £125 million. They are now getting 57 per cent of the bank in exchange for their debt, and will pay a higher price for each share, although their total investment and shareholdings will be the same under the new terms.