NIALL Booker, the Scot who runs the troubled Co-operative Bank, has revealed he is going to be only a temporary appointment as he sought to justify his £1.7 million pay package for working half of last year.

The country's eighth-biggest lender yesterday confirmed it made a pre-tax loss of £1.3 billion in 2013 and warned it would not make a profit this year or next.

Co-op Bank said yesterday it would be withholding £4.9 million for deferred bonuses from past bank staff after continuing financial problems.

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Among those affected was former bank deputy chief executive Rod Bulmer, who is to move to Co-op Group to run its insurance, funeral and legal businesses. He lost an £176,000 long-term incentive award he had initially been allowed to keep.

A former HSBC banker, Mr Booker was brought in last June. For his work during the balance of the year, Mr Booker's basic earnings of £669,000 were supplemented by £111,000 in pension payments and £943,000 from an unconventional allowance which is tied to the bank's capital position.

This allowance, which Co-op Bank said takes account of the broad range of specialist skills required of the role, means Mr Booker is paid an extra £140,000 a month as long as Co-op meets capital requirements.

It will be paid until June 2015, when it will be reviewed.

The allowance on top of his basic salary of £1.2m, means Mr Booker can expect to earn £2.9m this year.

Mr Booker said of his pay: "This is a short-term situation. This is not something Co-op Bank and the board has to pay me for years.

He added: "There are other people who are perhaps better qualified to take us forward from a steady state."

This means there could be further turmoil in the Co-operative movement.

After the wholesale replacement of senior executives at Co-op Group and the bank last year, Euan Sutherland was group chief executive for just 10 months before stepping down and declaring it "ungovernable".

Earlier this week it was revealed that former Government minister Lord Myners would not be staying on the board after May. He has run into opposition to his proposed governance reforms at the group.

Co-op Bank has shed 1000 jobs in the last year and warned of a likely 44 branch closures this year, prompting workers' representatives to urge it to stick to its ethical principles.

Rob MacGregor, national officer at trade union Unite, said: "Co-op Bank faces major challenges ahead, but we call on the bank not to make the same mistakes other banks have made and to stick to its ethical principles, which must include treating staff fairly.

"Staff are being asked to make sacrifices and over 1000 staff have already lost their jobs. In order to give the bank a sustainable recovery the Co-op is going to need motivated and loyal staff, so we urge the bank to protect jobs for the long-term."

Mr Booker, chairman of the committee of council of Perthshire boarding school Glenalmond College, apologised for Co-op Bank's problems.

He said: "We appreciate that customers and other stakeholders continue to feel angry about how past failings placed the future of the business so seriously at risk."

After the collapse of Co-op Bank's deal to buy 632 branches, including the whole of Lloyds TSB Scotland, from Lloyds Banking Group last year, it was revealed it had a £1.5bn capital hole. A restructuring has left Co-op Group with just a 30% stake in its former subsidiary.

This could fall further if the group opts not to participate fully in a further £400m fundraising Co-op Bank is conducting to cover mis-selling and other conduct charges.

Mr Booker said he is very confident the cash call will succeed.

He said investors would still like to pursue a stock market listing for the bank but this would be hindered by the various investigations into its affairs

The fundraising is expected to lift the bank's capital ratio - a measure of its financial strength - to around 9.8%, compared with the current 7.2% and the regulatory minimum requirement of 7%.

Despite the high-profile issues at the bank, the Co-op said its number of current accounts rose slightly to 664,775 by the end of the year.