Britain’s Co-operative Group will force bondholders to help plug a £1.5 billion capital hole, avoiding a repeat of unpopular taxpayer-funded bailouts made during the financial crisis.

We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the bank

Using a “bail-in” rescue model, bondholders will have to swap their debt for new bonds and equity in the bank, which will be listed on the London Stock Exchange.

The Co-op Group, Britain’s biggest customer-owned business, will also provide financial support for its bank­ing unit, the Co-op said yesterday.

Europe is pushing ahead with plans to implement a “bail-in” regime that would force bondholders and depositors, rather than taxpayers, to bear the cost of failed banks and the Co-op’s approach could become a blueprint for future rescues.

“We have put in place a detailed and comprehensive solution to meet the current and longer-term capital requirements of the bank. In doing so we have agreed a plan to ensure its future,” said Co-op Group chief executive Euan Sutherland.

Co-op Group, which runs supermarkets, pharmacies and funeral services, will retain a majority stake in the Co-op Bank, which has 4.7 million customers. Sources said bondholders are likely to end up with at least a quarter of the bank’s shares.

The bank’s future has been in question since ratings agency Moody’s cut its credit rating to junk status and warned it might need taxpayer support – something the bank denied.

Its capital position had come under scrutiny since it pulled out of a deal to buy hundreds of bank branches from Lloyds Banking Group in April.

Analysts have blamed Co-op Bank’s problems on its takeover of the Britannia Building Society in 2009.

Industry sources say Britannia, which had lent aggressively on commercial property, was likely to have required a taxpayer-bailout had it not been bought by the Co-op.