Barry Tootell, chief executive of the Co-operative Bank, has quit the firm after withdrawing from the acquisition of Lloyds TSB branches.
The news comes just weeks after the Co-operative pulled out of a deal to buy 632 branches of Lloyds TSB.
Mr Tootell's role will be taken over by Rod Bulmer as acting chief executive until a replacement is announced.
Mr Bulmer has worked at the firm for six years and held several senior executive roles within the retail banking department.
Mr Tootell took the role of chief executive in July 2011 to lead the business through the process of acquiring 632 branches of Lloyds TSB. However, it was announced last month that the Co-operative had withdrawn from this deal.
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The firm said: "Following the decision by the Co-operative Group and the 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."
There was more bad news for the firm after it was downgraded by ratings agency Moody's from C- to E+.
The firm said it was "disappointed" by the decision and acknowledged it needed to strengthen its capital position.
It 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."

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