The Co-operative Group is set to see its 30% stake in the Co-op Bank reduced further under a plan to shore-up the bank's finances.
As a result, a group of investors who injected almost £1bn into the bank last year will own an even bigger stake.
Co-op Group will still be the single biggest shareholder after Co-op Bank's move to raise £400m by selling shares.
Co-op Bank also announced that its chairman, Richard Pym, intends to step down by the end of the year.
The bank announced the need for extra funding in March when it uncovered significant new costs.
The costs related to PPI mis-selling and lapses in mortgage provision.
'Return to roots'In a statement, Co-op Bank chief executive Niall Booker said: "We have the support of our five largest shareholders for this transaction.
"If successful, the additional capital to be raised through this transaction will enable us to reset our starting capital position for the execution of our business plan to return to our roots as a bank focused on our retail and SME customers with values and ethics at the heart of our business."
The Co-op Bank had to be rescued last year after it was left with a £1.5bn capital shortfall, with many of its troubles stemming from the merger with the Britannia building society in 2009.
The bank was rescued by a group of investors, mainly hedge funds, last year who injected almost £1bn into the bank in return for a 70% stake.
The bank reported a trading loss of £1.44bn for 2013.
Last year, the bank was hit by a separate scandal when its chairman Paul Flowers was arrested in connection with a drugs supply investigation.
Earlier this week he pleaded guilty to charges of drug possession.
Despite all the problems, Co-op Bank says it is still considering listing its shares.
Poor dealLast month a report by Sir Christopher Kelly said the Co-operative Bank's merger with the Britannia building society in 2009 should never have happened.
His report stated both companies had problems that were exacerbated by the merger.
It also pointed to failings in management and governance "on many levels".
Sir Christopher added the deal might have worked had the organisation received first-class leadership, but "sadly it did not".
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