* Labour says move would be for commercial reasons
* Move would hand unions more control - Conservatives
(Adds reaction from Conservative Party)
By Matt Scuffham and Kylie MacLellan
LONDON, April 24 Britain's Labour Party is
considering moving a 1.2 million pound ($2 million) loan with
the troubled Co-operative Bank to Unity Trust Bank,
which is controlled by the country's trade unions, sources
familiar with the matter said on Thursday.
The sources said discussions were at an early stage and
emphasised Labour would continue to bank with the Co-op, a major
lender to Britain's main opposition party.
"We constantly review our financial arrangements and any
decisions taken, including any consolidation of loans, are done
for commercial reasons," a Labour party spokesman told Reuters.
The BBC reported earlier that Labour would look to move all
its current account facilities to the Unity Trust Bank once the
loan had been moved.
Co-op Bank hit trouble last year when a 1.5 billion pound
capital shortfall was exposed, leading the mutually-owned
Co-operative Group to lose control of the business to
bondholders including U.S. hedge funds.
The bank's problems were exacerbated when former chairman
Paul Flowers was charged with possessing illegal drugs.
The future of the bank remains in question after it said in
March it needed to raise another 400 million pounds to cover the
cost of past misconduct.
The bank is a 27 percent shareholder in Unity Trust Bank but
said in January that it was in talks to sell its stake. The
remaining stake is owned by trade unions.
The Conservative Party said moving the loan to Unity Trust
Bank would give unions more control over the Labour Party's
"The unions already pick the candidates, buy the policies
and choose the leader. Now (Labour leader) Ed Miliband wants
them to hold the purse strings as well," said Conservative
Chairman Grant Schapps.
Co-op Bank declined to comment.
($1 = 0.5960 British Pounds)
(Additional reporting by Andrew Osborn; Editing by Laura Noonan
and Mark Potter)