A hedge fund that was heavily involved in plans to take control of Co-op Bank from the Co-op Group has withdrawn from the ailing lender.
Aurelius Capital, the biggest hedge fund involved in the restructuring of Co-op Bank, sold nearly its entire stake to Perry Capital within days of the Paul Flowers scandal breaking, according to the FT.
The Co-op Bank has admitted that the scandal had harmed its current account business, saying: "Recent events may have caused some brand and reputational damage.
"These recent events may be a contributing factor to an increase the bank has seen in the switching out of current accounts."
Aurelius Capital is reported to have sold its bonds in the bank when they increased in value following the announcement of the restructuring deal.
In October the Co-op Group agreed to hand its creditors 70% equity after they rejected its plans to plug a £1.5bn capital hole in the business.
The Co-operative Group had originally planned to pump £500m capital into the bank, sell its £500m insurance assets and leave bondholders to take £500m of losses before floating the bank on the stock exchange, retaining a controlling 70% stake.
Bondholders rejected these plans and demanded in September that the group retain a stake of smaller than 50%, leaving bondholders including hedge funds in control when the bank is floated on the London stock exchange.