The Co-operative Bank has been put up for sale as part of its turnaround plan.
It said it had struggled to strengthen its capital position because of low interest rates and higher than expected costs.
The bank has warned it will struggle to meet its capital reserve targets in the medium term.
Dennis Holt, the bank’s chairman said: “The bank has met its Pillar 1 regulatory capital requirements continuously since 2014 and expects to continue to do so.
“At the same time, since we began work on the bank's turnaround, the board has always been clear that we would need to build capital for the future.
“We are now commencing a sale process, alongside other options. The bank's ethical heritage and customer proposition will be a central consideration in this.”
The bank has said it is also looking at other ways of raising capital.
A few months ago the bank made 200 roles redundant to mitigate the impact of a prolonged low interest rate environment.
In 2013 the bank was rescued by a group of hedge funds after it emerged it had a capital shortfall of £1.5bn.
It is currently 20 per cent owned by The Co-operative Group.
In 2015 the bank escaped a £120m fine from the Prudential Regulation Authority for “serious and wide-ranging failings” in its control and risk management framework, as a financial penalty was deemed not to advance the safety and soundness of the firm.
In the announcement of its sale, the Co-op Bank also said it expected to make a “significant” loss for 2016 but said this would be less than the loss for the previous year.