The Co-operative Bank is set to fail a key test of its financial strength this month and is expected to be forced at least to accelerate its recovery plan to keep regulators onside.
The scandal-hit bank is thought to have acknowledged that it has insufficient buffers to withstand a very severe recession, in spite of building £1.9 billion in extra capital in the past 12 months.
At one extreme, it could be forced to tap its shareholders for more capital or seek a rescue merger, but it is more likely that it will be pushed into tweaking its five-year turnaround plan so that it generates capital more quickly.
The Prudential Regulation Authority, which supervises banks, is already treating the bank as a special case after