The customer-owned group said Sir Christopher Kelly will head an investigation into its disastrous acquisition of Britannia Building Society and failed takeover of more than 600 Lloyds bank branches.
The rescue plan for The Co-operative Bank will force losses on to bondholders under a £1.5bn ‘bail-in’ of the bank.
The group yesterday said it is delaying payment of about £7m of interest due to bondholders after talks with regulators.
The Co-op is also understood to have considered handing control of the bank to the state under new ‘resolution’ plans – drawn up after the financial crisis to deal with failing banks.
But relinquishing control through resolution would likely have wiped out bondholders, compared with the 40p in the £1 they could get back through the bail-in plans.
Sir Christopher, who has held top civil servant roles in the Treasury, Department of Heath and former Department of Social Security, has been tasked with looking at decision-making, management, culture, governance, accounting and audit at the bank.
New group chief executive Euan Sutherland commissioned the inquiry, and its findings are expected to be presented to members at the Co-op’s annual meeting next May.
Mr Sutherland said: “We have developed and announced a comprehensive solution to meet the capital requirements of our bank, bringing stability to a business that is loved by its customers and members.
“As we move forward with implementing the detail of this plan, it is important to learn from the past.”
Sir Christopher said: “I look forward to helping these important businesses and the wider co-operative movement learn the lessons to take into the future.”
The black hole in the Co-op’s capital reserves largely stems from commercial property loans acquired through the merger with Britannia in 2009.