West Bromwich Building Society today confirmed a £182.5 million debt deal to boost its capital strength.
The lender said the agreement, which will see its debts converted into a new financial instrument which will qualify as high quality capital, would "significantly" boost its position.
West Bromwich also posted its results for the year to March 31, in which it made a pre-tax loss of £48.8 million.
The mutual said it planned to be predominantly funded by traditional retail savings in the future.
West Bromwich, the UK's eighth largest building society, has been at the centre of mounting speculation as concerns have grown over its health.
Recent reports had suggested the mutual could be subject to a Dunfermline Building Society-style rescue sale and break-up.
But chief executive Robert Sharpe seemed to brush this aside today, insisting on an independent future for West Bromwich.
"The next 12 months will be tough for all in the sector, but we are confident that our core principle of putting the safety of members first is right, and will see a stronger society emerge from these difficult times," he said.
"We have the right strategy and strength of capital position to enable us to look to the future, as an independent mutual society, with confidence."
The mutual said it had needed to convert its debts because stress tests by the Financial Services Authority (FSA) had increasingly focused on building societies' levels of capital, particularly so-called core tier 1 which has an ability to absorb losses.
"This increased focus on core tier 1 capital meant that the Society, despite having a relatively high level of total capital, was less well placed to withstand the stress-test exercises, as around half of its total capital was held in the form of non-core tier 1 instruments," the lender said.
The exchange with debt holders, which has received FSA approval, will complete by the end of July and result in about 82 per cent of the mutual's capital counting as tier 1.
Mr Sharpe said the move would enable the mutual to demonstrate under stress tests that it could withstand "further significant deterioration in market conditions".
"During a period of severe and unprecedented economic turmoil and the near collapse of the British banking system, the West Brom has carefully managed and refocused its business, driving through a programme of cost reduction to improve dramatically the efficiency of the Society, and has increased its core tier 1 capital base substantially."
The group described the loss made last year as "very disappointing", saying the balance sheet had been knocked by an increase in credit risk provisions, write downs on its homes portfolio and the society's £12.2 million contribution to the Financial Services Compensation Scheme.
"In the light of the group's financial result, it is clear that there is a need to refocus strategically and address head-on those issues which have been responsible for the recent poor performance," the firm said.
New strategies which have already come into force include a focus on prime residential lending within its West Midlands heartland and withdrawal from the commercial and buy-to-let markets, which are now seen as riskier.
It also has a plan to reduce the level of non-retail funding to less than 15 per cent by the end of 2010 as it looks to focus on funding through savings.Reuse content