The Co-op's stake in its banking arm is to be reduced further after the troubled lender unveiled details of a £400 million rescue fundraising.

The mutual currently owns 30% of the bank but this will be cut because the business is not taking up all of its rights in the offer to shareholders.

The Co-op said it will still have a significant stake in the business and expects to remain the single largest shareholder.

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The exact size of the Co-op's stake will not be known until the fundraising is complete in a few days' time.

The bank's four other major shareholders, who include US investment firms, are taking part in the fundraising but the Co-op is buying shares using funds raised from selling some of its £120 million entitlement as it looks to keep its holding above 20%.

If the stake in the bank falls below 20%, a guarantee that it must uphold its ethical cooperative values will no longer stand though the business can choose to keep it.