The Co-operative Bank, rescued from near collapse by hedge funds in 2013, said it has put itself up for sale amid a neeed to build its capital and meet longer term UK bank regulatory capital requirements.

The Manchester-based “ethical” bank — hit by a number of scandals in recent years — said its capacity to meet regulatory requirements organically “has been constrained by the impact of interest rates that are lower than previously forecast, reducing the bank’s ability to generate income, and by higher than anticipated transformation and conduct remediation costs.”

It said: “… the board is today commencing a sale process, inviting offers for all of the issued ordinary share capital of the bank, and is also considering ways to raise equity capital from existing and new capital providers and a potential liability management exercise of its outstanding public debt.”

The bank, which has about four million customers, has engaged BofA Merrill Lynch and UBS Investment Bank for both of these activities.

It said the sale process and review of the bank’s outstanding liability structure have been discussed with the UK’s Prudential Regulatory Authority (PRA).

Co-operative Bank chairman Dennis Holt said: “The bank has met its Pillar 1 regulatory capital requirements continuously since 2014 and expects to continue to do so. 

“At the same time, since we began work on the bank’s turnaround, the board has always been clear that we would need to build capital for the future. 

“We are now commencing a sale process, alongside other options. The bank’s ethical heritage and customer proposition will be a central consideration in this.”

Co-operative Bank CEO Liam Coleman said: “Since 2013, we have successfully addressed significant legacy issues, reduced the cost base and rebuilt our franchise and customer proposition. 

“The Co-operative Bank delivers an attractive banking proposition that is differentiated by our values and ethics and is highly valued by our four million customers. 

“Customers value The Co-operative Bank and our ethical brand is a point of difference that sets us apart in the market. 

“While our plan has been impacted by lower for longer interest rates, the costs associated with the sheer scale of the transformation and the legacy issues we faced in 2013, there is considerable potential to build the bank’s retail franchise further using the strength of the brand, its reputation for strong customer service and distinctive ethical position.” 

The Co-op Group, a roughly 20% shareholder in the bank, said in a statement: “As a minority investor in The Co-operative Bank, the Co-op Group is supportive of the plan to find the bank a new home. 

“We will continue to work with the bank and other investors through the process. 

“We are focused on finding the best outcome for our members, two million of whom are bank customers, as well as the members of our shared pension scheme which is well funded and supported by the group. 

“Our goal is to ensure the continued provision of the type of co-operative banking products our members want.”