The Co-operative Bank has agreed a deal with the Prudential Regulation Authority (PRA) to plug a £1.5 billion hole in its finances.

Co-op Bank bondholders will be offered shares in the bank – a so-called ‘bail-in’. They will gain a “significant minority stake” in the bank, the Co-op said.

However, such bondholders, many of whom are private individuals, could lose up to 30% of their investment.

The bank’s parent, the Co-operative Group, will also inject private extra capital.

The move will see the bank’s mutual status blurred by the bail-in.