So how, oh how on earth an the UK now sustain its ATMs working, wonders (most likely) half of the Irish Cabinet… Per Guardian report: http://m.guardian.co.uk/business/2013/jun/16/co-op-bank-deal-regulators?CMP=twt_fd the Cooperative Bank is planning on plugging a GBP1.5 billion hole in its capital reserves by soaking it bondholders with a 30% haircut.
Of course, there is little new here, as investors expected the haircut for some time now: http://citywire.co.uk/money/co-op-sells-tranche-of-loan-book-as-investors-fear-haircut/a683473
Per citywide: "Britannia building society, which Co-op acquired in 2009, is seen as the root of the bank’s problems, specifically the poor grade corporate loans it acquired."
Obviously, there will be tears when Co-op busts the bondholders bubble, but the tears might be less significant now, given the fact that the bonds have been trading at discounts for some time and that many of the few retail investors have probably sold out of the bonds by now, leaving behind the usual speculative risk-takers. Still, this is a significant test for the small, but very strategic institution that came to challenge the usual banking establishment.