The Chief Executive of a major UK bank has resigned after the institution’s debt rating was reduced to “junk” status, following annual losses of well over £600 million.

The Co-operative Bank, who recently failed in a bid to purchase 631 banking branches from Lloyds Banking Group, had their rating downgraded by the ratings agency, Moodys.

The news came an hour before the resignation of chief executive, Barry Tootell, citing fears across the board over potential losses.

A statement on the Bank’s website strongly opposes the decision, and reads: “We are disappointed by the ratings downgrade announced by Moody’s. We have a strong funding profile and high levels of liquidity, which are significantly above the regulatory requirements.”

The fall in the ratings, combined with last year’s losses, has prompted calls that the bank is in dire need of taxpayer bailout, a notion swiftly denied by Co-op.

The City’s new regulator, the Prudential Regulation Authority (PRA) will be keeping a close eye on proceedings, with many believing that the watchdog is set to call on banks to improve capital reserves. This follows a recent Bank of England announcement that up to £20 billion is needed to boost reserves of lenders.

The Co-operative Bank, who has some 6.5 million customers, has dealt with a flurry of misfortune recently, including their recent decision to pull out of the deal for 631 Lloyds branches.

The ratings agency, Moody's, said a factor in the decision was that the bank had reported an increase in the ratio of loans at risk , which at the end of 2012 had risen from 8.1 per cent to 10.9 per cent.

The Co-op statement added: “We do acknowledge, like the rest of our banking sector peers, the need to strengthen our capital position in light of the broader economic downturn and the pending introduction of enhanced regulatory requirements, and we have a clear plan to drive this forward throughout the coming months.

“In March, we announced the sale of our life business to Royal London and also our intention to sell our general insurance business. In addition to these measures we plan to significantly simplify our business, which will greatly improve our operational effectiveness and also enhance our capital position in the process.”