A spokesperson for The Co-operative said it would continue to provide lending for existing customers and confirmed that the freeze does not apply to retail customers.
The spokesperson said: "We are not offering new loans to new corporate customers but are continuing to provide facilities for existing customers."
Chief executive Barry Tootell stepped down earlier this month following the failed takeover of the Lloyds Banking Group Verde Business.
Tootell’s resignation preceded Moody's decision to downgrade The Co-operative’s debt rating to “junk” status.
Moody’s warned that the bank could need “external support” if it does not strengthen its balance sheet.
New chief executive Euan Sutherland is undertaking a review of the group’s strategy including the future of the banking business.
It is unclear whether funds from the wider Co-op Group will be used to support the bank.
The mutual said in March that it would sell its general insurance arm to shore up its finances.
It has also agreed to sell its life insurance business to Royal London Mutual Insurance for £220m.
In March that FCA told British banks that they must raise £25bn of extra capital by the end of the year to absorb any future losses on loans.
State-backed Royal Bank of Scotland and Lloyds Banking Group have already agreed plans to shore up their capital.
The regulator is expected to complete discussions with other banks, including the Co-op, by the end of June.
