The Co-operative Group has confirmed that it will hand control of its troubled banking arm to a group of powerful investors through a new rescue plan. 

The funerals-to-supermarkets group said owners of its bonds, including US hedge funds, will be given 70% of the Co-operative Bank, leaving it with just 30% of the lender.

The revised rescue plan aims to plug a £1.5 billion sterling black hole in the bank's finances.

The Co-op Group had initially hoped to retain control of the ethical lender by giving bond investors a minority stake in return for a £500m loss on their debt.

But bondholders, including US hedge funds Aurelius Capital Management and Silver Point Capital, will take control of the bank under the new plan, which will see it listed on the stock market next year.

The Co-op said its values and ethics will be "legally embedded" in the lender's new rules.

Investors must now vote to back the plan, and the Co-op warned that the bank will fall into state hands through the resolution process if they do not, leaving investors empty-handed.

It also announced plans to close around 50 of its 324 bank branches, about 15% of its estate, without revealing how many jobs will go among the lender's 9,000 staff.