The Prudential Regulation Authority has approved Royal London’s purchase of Co-op’s life insurance business and the Financial Conduct Authority has backed it buying the asset management business.
The regulator’s stamp of approval follows the signing of a sale and purchase agreement earlier this year between both parties.
The deal came as Co-op was told by the new regulators that it had to plug holes in its finances.
Under its agreement with the PRA to meet current and longer-term capital adequacy requirements, the Co-operative Bank needs to increase its aggregate common equity tier one capital by £1bn this year, and by a further £500m in 2014.
On announcing the rescue plan in June, Euan Sutherland, chief executive of The Co-operative Group, said it would allow bondholders to “own a significant minority stake in the bank”, and would subsequently “allow them to share in the upside of the transformation of the bank”.
As part of the deal with Royal London, CIS must now convert from an industrial and provident society to a limited company and change its name to RL (CIS) Limited.
Phil Loney, group chief executive of Royal London, said: “Today is a significant milestone in the process of buying Co-operative’s life insurance and asset management businesses.
“We have the approval of our members and now we have the approval of the PRA and FCA. The transaction can now go forward to completion and we can start to realise the benefits for Royal London members and for the Co-operative’s policyholders.”
Niall Booker, chief executive of The Co-operative Banking Group, said: “The transfer of ownership of our life assurance and asset management businesses to Royal London will ensure the continued protection of our policyholders, within a strong, mutual business with the necessary scale and focus on the long-term savings sector.
“We believe this is the best outcome for our policyholders and members.”
The deal is expected to complete on 31 July 2013.