CO-OPERATIVE Bank plans to cut 15% of its branches as part of a £1.5 billion rescue deal backed by hedge funds, but has not yet decided whether any of its four Scottish outlets will be axed.

The move, which has still to be formally approved, is expected to see up to 50 of its 324 high street sites close by the end of next year.

At the moment, Co-op Bank has one outlet under its own badge in both Edinburgh and Glasgow, while there are also Britannia Building Society sites in Aberdeen and Glasgow.

Co-operative Group chief executive Euan Sutherland warned the restructuring would result in "significant" job losses among the 9000 bank staff.

Edinburgh-born Mr Sutherland, who only joined Co-operative Group in May, believes the rescue is a "very positive move", which puts Co-op Bank "on a solid foundation with values and ethics at its heart".

The capital-raising proposals see Co-operative Group inject a further £462m but get left with just 30% of the equity in the lender which bears its name. The remaining 70% of shares will be taken by bondholders including a number of US hedge funds such as Aurelius Capital Management and Silver Point Capital.

The bank will be listed on the stock market next year with Co-op erative values and ethics being embedded in the lender's constitution and upheld by a dedicated board committee.

Co-op Bank, now headed by former HSBC executive Niall Booker, has run into trouble after a number of loans it acquired as part of the takeover of Britannia Building Society turned out to be impaired. It also spent hundreds of millions of pounds developing an IT system, which was scrapped when it had to abandon a deal to buy 632 branches from Lloyds Banking Group.

In the recapitalisation plan document published yesterday, directors of Co-op Bank said it would not be profitable in 2013 and 2014 and said they "can give no assurance that the Bank will generate a profit for some years thereafter". The LT2 group of investment managers - working on behalf of hedge funds including Aurelius, Beach Point Capital Management, Caspian Capital, Canyon Capital Advisors, Monarch Alternative Capital and Silver Point - is providing £125m of capital.

Speaking for the LT2 Group, Caroline Silver, of Moelis & Company UK, said: "Over the last few months, the LT2 Group has worked determinedly with the Bank and the Co-op Group to reach agreement on what will, upon completion, be the first successful consensual creditor bank bail-in in the United Kingdom, without taxpayer support.

"We are proud that the recapitalisation will enable the Co-op Bank to continue its unique mission as a UK bank committed to the values and ethics of the co-operative movement."

Andre Spicer, a professor at Cass Business School, said: "With hedge funds at the wheel, the bank will become more ruthlessly commercial. Cutting 1000 jobs at the same time as you launch an ethics policy is quite a contradiction."

Campaigners fighting for the rights of between 10,000 and 15,000 small investors said the latest restructuring plan was a better outcome than the one first mooted earlier in the year, when Mr Sutherland warned there was "no plan B".

That would have seen many retail bond investors given shares in return for taking a loss on the value of the debt they held.

The updated plan gives an option to take new bonds and maintain income over 12 years but involves giving up a capital sum. The other option is for lower payments but with a future capital amount. Although both outcomes will see retail investors lose money, campaigner Mark Taber said the changes showed Co-op had "really listened" .

Mr Sutherland insisted Co-op Group had stood "firmly behind the small investor".

He said: "We have put a plan together to protect small investor interest for a period of 12 years, which is a very unusual consequence out of a restructuring such as the one we have been facing."