The Co-operative Bank has stopped lending to new business customers indefinitely in an effort to plug its estimated capital shortfall of over £1bn.
The Co-op, which has confirmed the decision was taken due to the amount of capital it has to set aside for SME lending, will continue to lend to existing business customers on a case-by-case basis.
The lender says it will continue to lend to mortgage borrowers.
Earlier this month, Co-op Bank chief executive Barry Tootell quit after Moody’s downgraded the bank to junk status and warned it may need taxpayer support after heavy losses on Britannia Building Society loans. The Co-op group has ordered a strategic review of the firm in an effort to plug the capital shortfall.
The news came just weeks after the Co-op pulled put of a deal to buy 632 Lloyds Banking Group branches, citing the poor economic climate.
A Co-op spokesman says: “The review of the Co-operative Bank is ongoing. However, an early decision was to confirm that the primary focus of the banking business is to be directed at serving and expanding our presence amongst retail customers whilst continuing to support our existing business customers.”
Trinity Financial product and communications director Aaron Strutt says: “There is always a danger that it could hike up its SVR to deal with the capital shortfall, which we have seen some of the other banks do.”