The Co-op's chief executive admits to a "diasastrous" year for the group, and will need to decide how to reform the sprawling group.
Co-op boss Niall Booker said the bank still had "significant issues" and almost collapsed because of a £1.5bn hole in its balance sheet.
Financial institutions in the US and Britain have been forced to begin the New Year by facing up to past mistakes.
In a scathing report into the governance of the Co-operative Group, former City minister Lord Myners today said radical changes were necessary to return the group to profitability.
The report said the Group's present governance structure was "not fit for purpose" and highlights "deplorable governance failures" that led to the near collapse of the group. Lord Myners calls for:
- A new "highly competent and qualified" Group Board with independent non-executive directors to lead and oversea the executive management teams.
- Genuine co-operative values and principles to be protected in the future governance structure.
- Member benefits should no longer be "deliberately restricted to a tiny and potentially quite unrepresentative body", but should be felt by the whole customer-owned organisation.
Lord Myners has called for the Co-operative Group to make radical changes to restore group profitability, in a damning report in which he blasts some elements of the company for being "struck in denial" over its failings."
I have no doubt that the Co-operative Group can over the next five years reverse a decline that started over 50 years ago. But I am less confident that it will choose to do so.
There is no short cut to recovery from its present weakened state. It will require retrenchment and some painful choices.
Financial health can only be restored through steady, step by step, rebuilding of the group's profitability and repayment of its excessive debt."
Former City minister Lord Myners has laid out his plans for saving the Co-operative Group with a number of "radical" decisions he believes are needed to overhaul the a which last month reported annual losses of £2.5 billion.
The Labour party is looking to end its long-standing relationship with the troubled Co-operative Bank, which stretches back to 1920.
Labour's general secretary Iain McNicol is understood to want to move a £1.2 million loan from the Co-op to the trade union-controlled Unity Trust Bank and current accounts are also likely to be shifted, according to PA.
The move comes after a tumultuous period for the bank, which has seen record losses and the resignation of chairman Paul Flowers, who is now facing drug possession charges.
Labour said the change of loan provider was for "commercial reasons", but the controversy gripping the Co-op over the past year is thought to have strained relations.
The chief executive has admitted the Co-operative's 'disastrous' £2.5bn losses for 2013 means that "thousands" of jobs will go from the organisation.
Richard Pennycook said: "I wouldn't want to pretend that there won't be job losses. We have said that there will.
"I don't want to put a specific number on [fewer people working for the Co-operative] but it will be a smaller group, some thousands of people smaller than that.
"Some of those because of our colleagues, in businesses that we are selling, will be going with those businesses to new owners."
He said that the group would remain a "very significant" employer in two years' time, adding that within four weeks the organisation's AGM would reveal the "new shape of the group", and a "clearer idea of how it is going to look".
Richard Pennycook admits job losses at @thecooperative inevitable as group shrinks. Currently employs 90,000 people.
The interim chief executive of the Co-operative said the group's losses arose principally from three causes.
– Richard Pennycook chief executive of the Co-operative group
Firstly, the continuing losses reported by the Bank as a result of the impairment of corporate loans, conduct issues and failed computer development projects.
Secondly, the write-off of our accumulated 115 year investment in the Bank following its emergency recapitalisation, in which we participated but in the process saw our shareholding fall from 100% to 30%.
And thirdly, a partial write-off of the goodwill created on the 2009 acquisition of the Somerfield food business following a strategic review of that business.
The final results for The Co-operative Group highlighted heavy losses that reflected:
- Significant losses at The Co-operative Bank (“the Bank”)
- Loss on reduction in Group’s shareholding in the Bank
- Impairment of goodwill which arose on the Somerfield acquisition
- Reduced sales in Food, impacted by disposal programme designed to focus business on its core convenience store chain
- Increased central corporate costs
The Co-operative Group has announced annual losses of £2.5 billion after suffering the worst crisis in its history following the near-collapse of its banking arm.
Interim chief executive Richard Pennycook said: "2013 was a disastrous year for the Co-operative Group, the worst in our 150-year history.
"Today's results demonstrate that but they also highlight fundamental failings in management and governance at the group over many years.
"These results should serve as a wake-up call to anyone who doubts just how serious the challenges we face are."
The Co-operative Group has reported annual losses of £2.5 billion, the worst in the company's history.