The agency slapped a negative outlook on the group’s double-B plus rating, warning of a potential future downgrade.
It came as the Co-op Bank began talks with the regulator over who will take on the top job after its chief executive Barry Tootell quit on Friday.
Its eventual choice for the position must be vetted and interviewed by the Bank of England’s prudential regulation authority before taking the role.
The banking arm has a capital hole of around £800m, which it hopes to fill by selling its life and insurance arms, and running down bad loan portfolios.
But if the sales do not raise enough money, the bank will come up short.
And analysts fear that, in a stressed situation, the capital hole may even increase to £1.8bn. The bank can shrink its balance sheet or issue bonds to raise the capital.
But it may also end up calling on its parent group for the funds.
“The outlook revision reflects our view that the Co-operative banking group’s focus on strengthening its capital position could impede the group’s execution of its overall financial objectives,” said the ratings agency.
“We believe it could increase the execution risks surrounding the trading group’s deleveraging plans, the realisation of which are critical for the group to maintain its ratings.”
Meanwhile the Office of Fair Trading decided against referring the banking industry to the Competition Commission, as new entrants have come into the current account market since its last review in 2008.