West Bromwich has revealed that it is in advanced discussions with holders of its £182.5m of subordinated debt to exchange it for a new instrument, which will qualify as core tier 1 capital.
It says this move will strengthen the society’s core tier 1 capital ratio. It also says it will make a further announcement with respect to this transaction in the near future.
The society has denied in the past that it is in financial difficulty, and is set to release its 2008 results on Monday.
BBC business editor Robert Peston earlier reported that the West Brom was in crisis talks with the FSA, and said the Government was possibly preparing to break up the mutual, as it did with the Dunfermline in March.
West Bromwich currently has a £10bn asset portfolio. The society has 46 branches, 350,000 customers and 850 staff.