The former boss of the Co-op's financial group said he warned colleagues of the dangers of taking on Lloyds.
The boss of The Co-operative Group, Euan Sutherland, has spoken to ITV News about the group's rescue deal for its bank.
A rescue plan for the Co-operative's troubled banking arm has been unveiled in a bid to plug a £1.5 billion hole in its balance sheet.
Embattled Co-operative Bank has admitted it is losing current account customers as its reputation takes a battering following its financial woes and the scandal involving its former chairman.
The group revealed in a statement outlining technical changes to its rescue fundraising deal that "recent events" were likely to have contributed to an increase in the number of customers switching current accounts to rivals.
But the Co-op said savers were so far sticking with the group, with its deposits remaining stable.
The lender has been thrown into turmoil after regulators uncovered a $1.5 billion black hole in its finances and as the scandal surrounding ex-chairman Paul Flowers and his appointment refuses to die down.
Mr Flowers has been bailed after being questioned by police officers investigating allegations of drug supply offences.
Labour has said its finances are on a "secure footing" following reports that it may have to pay off loans from the Co-op before the 2015 general election.
A report in The Sunday Telegraph claimed that the opposition party could face the prospect of paying off more than £2 million in loans from the Co-op and a sister bank when the lender is taken over in a rescue deal being put together by US hedge funds.
A Labour spokesman said: "Our loans with the Co-operative Bank and Unity Trust Bank are secured and are being repaid in accordance with formal long-term commercial agreements and the Labour Party is on a secure footing for the future."
But this is less than the £1 billion of capital the Co-op initially expected to pump in to meet City regulator rules to strengthen its balance sheet.
Several thousand small retail investors, who invested an average of £1,000 each in the high-yielding bonds for a steady income, are expected to be handed income-paying bonds.
This follows campaigning against the initial plan which would have given them shares in the bank.
However, the new bonds will pay a lower rate of dividend.
Details of the The Co-operative Group's plan to save its troubled banking arm will be released today.
The revised plans could involve axing around 1,000 jobs, over 10% of the banks' workforce, according to reports.
The Co-op declined to comment on the job loss plan, and it is unclear whether the final number of job losses will be released today.
It struck a deal last month to save the bank, but the move will see it hand over control to a group of powerful investors, keeping only a 30% stake.
Chair of the Treasury Select Committee Andrew Tyrie says the Co-op Bank's shortcomings have become 'a familiar story' in the banking world.
– Andrew Tyrie, Chair of the Treasury Select Committee
Being owned by a mutual, the Co-op Bank differed from most of its competitors. But on today's evidence, its shortcomings did not. A lack of personal accountability at senior levels, ineffective corporate governance and insufficient experience and expertise among those taking the decisions; this has become a familiar story.
Co-operative Group chairman Len Wardle said he told the board in August of his intention to quit and insisted the group will emerge 'stronger than ever'.
The former Labour councillor called for a new independent chairman, saying: "The Co-operative is at its best when it is reforming and I want this change to continue."
News of his departure emerged hours after former chief executive Peter Marks told MPs the bank will struggle to retain its ethical ethos under its new owners.
But he refused to shoulder the blame for the bank's troubles, saying: "I cannot take responsibility for something I'm not in full control of."
The Co-operative's former chief executive says it is a "tragedy" that the group has lost control of its banking arm.
Peter Marks appeared before MPs on the Treasury Select Committee, but refused to take the blame for the Co-operative Bank's demise.
Under plans to repair a £1.5 billion capital hole in its balance sheet, a deal has been struck to hand control of its banking arm to bondholders, including US hedge funds.
The member-owned group will be left with just 30% of the bank.
The Co-operative Group's long-standing chairman Len Wardle has announced he is standing down in May.
The Co-operative Group's long-standing chairman Len Wardle is standing down next year after it lost control of its banking arm to investors including US hedge funds.
The Co-op Group chief, Euan Sutherland, has acknowledged that the first half of this year has been "difficult" but insisted the plan to restore the banking arm to health remains on track.
– euan sutherland, chief executive, co-op group
This has been a very difficult first half for The Co-operative Group and the results highlight both the well-documented challenges faced by The Co-operative Bank and the significant work to do at Group level.
Importantly, today’s announcement also underlines the need for the £1.5bn Capital Action Plan we announced in June to stabilise the Bank, which we reaffirm today and which remains on track ...
There are no quick fixes here. This will be a challenging four-year turnaround that begins with our comprehensive plan to restore the Bank to stability ...