The Co-operative Bank has announced a £500 million investment to update its IT systems, as the troubled lender initiates major cost-cutting and restructuring plans.

The bank has previously attempted to modernise its IT, but a plan to implement a newFinacle core banking platform was scrapped recently, which led to a £148.4 million write-down in September.

“As result of historical underinvestment, among other factors, a number of the bank’s IT systems now, or will soon, require their hardware and operating systems to be updated and improved,” the bank said in its Recapitalisation Plan, published yesterday.

“The bank has currently budgeted in the region of £500 million in connection with the re-engineering of the bank’s IT platform to support the core business strategy of the bank, its cost saving programme and the reorientation of the bank’s distribution channels.

“Within this amount, total investment spend on transformation, including IT remediation, digital catch-up and other IT initiatives in the next three years of approximately £400 million to £350 million is currently budgeted.”

The Co-op Bank’s Recapitalisation Plan sets out how it will fill a £1.5 billion hole in its balance sheet following the purchase of Britannia Building Society. It also announced that it will cut up to 1,000 jobs and shut around 50 retail branches. IT jobs have not been ruled out of the redundancies.

Co-op said thats IT development plan will be carried out in four phases - remediation, digital catch-up, simplification and strategic optimisation. Over the next two years, it will focus on improving the existing system and bolstering its online banking systems.  

“The primary focus for 2014 and 2015 will be remediation of the existing system issues to ensure the bank can meet its ongoing commitments to regulators and customers, and the creation of an IT platform which allows the bank to provide new digital channel applications to enable appropriate online products, specifically web-based and mobile banking and functionality for its customers,” it said.

The bank added it will work with an “established digital provider” to enhance its digital and self-service channels, to allow customers to access its products and services “when and where they choose”.

“It is expected that over time, digital channels will be customers’ preferred point of contact,” Co-op said.

As part of ongoing IT transformation plans, the bank recently announced that it had appointed former HP Enterprise Services vice president Bill Thomas as a non-executive board member.