The Co-operative Bank’s debt rating has been downgraded to “junk” status by ratings agency Moody’s, following problems stemming from bad loans associated with its takeover of Britannia Building Society in 2009. Moody’s has warned that the bank may need to seek “external support” if it could not strengthen its balance sheet. Moody’s believes that the bank’s “problem loan ratio” rose to 10.9% in 2012, up from 8.1% in 2011, reflecting a deterioration in its commercial property portfolio.The Co-op said it was “disappointed” by Moody’s decision, however has acknowledged that there was a “need to strengthen our capital position in light of the broader economic downturn and the pending introduction of enhanced regulatory requirements”. The bank has stated that it is intending to sell off its life and general insurance businesses, and simplify its operations in order to get itself back into a better financial position.In March, the Co-op Bank reported annual losses of £674m for 2012, which followed by the resignation of chief executive, Barry Tootell, after the bank’s failure to buy 631 branches from Lloyds Banking Group. Mr Tootell will be replaced temporarily by Rod Bulmer, the bank has said.The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.Setfords Solicitors are a national full service law firm, with debt recovery solicitors in Norwich and across the country.