Co-op bank chief quits after credit rating agency Moody's warned it could need taxpayer help to deal with 'problem loans' Barry Toottell quits as chief executive after Moody's downgrade Bank faces £1billion capital blackhole which could force asset sales Agency predicts the UK authorities may have to come to lender's rescue Comes just a month after deal to buy 632 Lloyds branches collapsed The boss of the Co-operative Bank resigned today, hours after a leading credits agency issues a warning about the bank's financial health. Moody's downgraded the firm's credit rating, warning that it could need 'external support' to deal with problem loans and plug gaps in its balance sheet. Chief executive Barry Toottell decision to quit comes just a month after the bank abandoned plans to buy more than 600 Lloyds branches. The Moody's credit ratings agency raised doubts about the Co-Operative banks ability to raise funds to plug gaps in its balance sheet In a downgrade last night, Moody's said the bank's capacity to absorb future losses was now too low to support an investment grade rating. It warned of further downgrades, claiming there were doubts about the lender's ability to plug a capital blackhole with help from the British taxpayer. The lender said it was disappointed by the downgrade. There has been speculation that the Co-op Bank faces a £1 billion shortfall in its capital position, although it has been working to address this with the disposal of assets, such as its life and general insurance businesses. Mr Tootell, who was brought in to lead the banking business as it tried to buy 632 branches from Lloyds Banking Group as part of Project Verde, has now stepped down. The bank said in a statement: 'Following the recent decision by The Co-operative Group and Banking Group Boards to withdraw from the Verde process, Barry has decided that the time is now right for him to stand down from his role.' Barry Tootell today resigned as chief executive of the Co-operative Banking Group He has been replaced temporarily by Rod Bulmer, who joined the Co-op six years ago from Santander. A permanent replacement will be announced 'in due course', the bank added. Moody's calculated that the Co-op's 'problem loan ratio" had increased from 8.1 per cent in 2011 to 10.9 per cent at the end of 2012. It was blamed on a deterioration in its slate of commercial property. Most of its risks stem from Britannia Building Society, which it acquired in 2009. Moody's said the Co-op under-estimated the risks of the acquisition, especially against the backdrop of weak economic conditions. It added: 'Moreover, the bank's ability to generate the earnings needed to replenish capital, if higher losses materialise, is diminished by its slow progress in realising merger-related revenue and cost benefits.' The Co-op said: '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. 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. The firm sold its life business to Royal London earlier this year and also plans to sell off its general insurance business. The actions we will now take to strengthen our balance sheet and simplify our business model around a core relationship banking offer, will create a compelling co-operative banking business which is truly distinctive within the banking sector.