RATINGS AGENCY MOODY’S has downgraded four of Australia’s major banks, citing the Australia’s banking system’s underlying reliance on offshore debt and its sensitivity to wholesale debt market conditions as reasons behind the ratings change.

The banks were downgraded from Aa1 to Aa2, according to ABC News. The rating for the four banks’ subordinated debt was downgraded from Aa2 to Aa3.

The Sydney Morning Herald reports that, in his statement, Moody’s senior vice-president Patrick Winsbury said:

While the major banks have reduced their sensitivity to disruptions in the wholesale funding markets, the Australian financial sector’s long-term, underlying reliance on offshore debt remains in place.

Although bank shares fell 0.5 per cent on the news, which came shortly before the markets closed, the Wall Street Journal reports that traders claim the impact of the downgrade was limited because it had been well-flagged in advance.

The four banks involved – Commonwealth Bank of Australia, Westpac Banking Corp, ANZ Banking Group Ltd, and National Australia Bank Ltd – are four of the just 14 lenders in the world which have an Aa rating or higher with the Standard and Poor’s credit ratings agency, according to Bloomberg.