Barclays yesterday admitted it faces a £50 million fine from regulators over its controversial 2008 fundraising from Qatari investors as it published the prospectus for a fresh £5.95bn share issue.
Meanwhile, UK Financial Investments, which oversees the Government's stakes in Royal Bank of Scotland and Lloyds Banking Group, announced it has appointed James Leigh Pemberton, son of former Bank of England governor Robin Leigh-Pemberton, as chief executive.
Co-op Bank needs to fill a £1.5bn capital hole revealed after the collapse of a deal to buy what is now TSB bank from Lloyds in April.
A group of investors called LT2 Group has submitted proposals to the board of Co-op Bank through investment bank Moelis & Company.
The unnamed investors, who are thought to include hedge funds Aurelius Capital Management and Silver Point Capital, want to convert the bank's debt directly into equity. This could lead to a significantly greater dilution of the bank's mutual ownership than previous plans announced in June by Co-op.
Co-op wants to inject £1bn into the bank by selling off businesses and issuing more bonds. The bank's bondholders would raise the remaining £500m by taking losses on their bonds in return for new shares listed on the stock market. Co-op group, whose chief executive is Euan Sutherland, would retain a 75% stake. However, Co-op requires 75% backing for its scheme to go ahead.
As well as objections from the LT2 Group, a group of private investors also opposes the Co-op's scheme.
A Co-op spokesman said: "Our Capital Action Plan, announced on June 17, was developed after full consideration of all the options, including structures that were similar in nature to that outlined by Moelis."
The spokesman added: "We are uncertain of the structure, deliverability and conditionality of what is proposed by Moelis, but we are willing to engage with them to investigate further."
But a spokesman for the LT2 Group said: "We have attempted to engage in meaningful dialogue with the bank over the past three months to achieve a solution that promptly and consensually restores the bank to financial health. The inherent conflict of interest between the group and the bank has prevented substantive engagement."
Barclays yesterday revealed it faces a £50m penalty for failing to disclose £322m paid in advisory fees to Qatari investors who helped bail it out during the financial crisis and avoid taking state bail-outs alongside Lloyds, owner of Bank of Scotland and RBS.
In the prospectus for its share issue, Barclays said the Financial Conduct Authority plans to fine it £50m because it "acted recklessly" in not adequately disclosing "advisory service agreements" linked to Barclays' emergency fundraising which saw Qatar Holdings invest £5.3bn in the bank. Barclays disputes the FCA's findings and the case could go to a tribunal.
Barclays' prospectus also said its income in July and August fell by £500m from a year ago as revenue in its investment bank fell.
Barclays launched its rights issue to plug a £12.8bn capital shortfall identified by regulators in July.
It is offering shareholders one new share at 185p for every four they own. The new shares are expected to start trading on October 4.
Meanwhile, UKFI said that Mr Leigh-Pemberton, Credit Suisse's UK chief executive, will join during the course of October. At the beginning of January 2014 he will be appointed as executive chairman, when existing chairman Robin Budenberg steps down.
The announcement came hours before the Government announced it is selling a 6% stake in Lloyds to institutional investors.