The deal will see the Co-Op Group’s stake in the bank reduced to just one per cent.
The hedge fund investment in 2013 saved the bank from going under and helped to protect over 4m customers.
At the beginning of 2017, there was an unsuccessful attempt to sell the bank following which the consortium of hedge funds agreed to increase their shareholding while injecting £250m and writing off £440m in debt.
Although the deal, approved by the Bank of England’s Prudential Regulation Authority, provides welcome relief to the embattled bank, many parties have expressed concern about the organisation retaining its “ethical” way of doing business.
Shaun Fensom from the campaign group Save Our Bank recently told BBC Radio 5 Live that “there is every indication that the hedge funds – who are only going to be there for a while – understand that the commercial survival of the bank very much relies not only on talking the talk on ethics, but walking the walk as well.”
These special ethical values are for example, the bank not providing services to fossil fuel companies and payday loan providers.
The rescue package approved by 90% of shareholders on Monday 21 August is expected to go through by the start of September 2017 and will spare the regulator the job of stepping in to manage a wind up of the bank that was founded in 1872.