Moody's has downgraded the credit ratings of New Zealand's major banks one notch, reflecting the challenging economic environment and their high reliance on overseas funding.
Moody's says the downgrade on Friday reflects the challenging economic environment in New Zealand and the banks' high reliance on overseas funding also makes them vulnerable to a downturn in global credit markets.
The agency has been reviewing the banks since February this year and also commented on individual banks' loan books.
It says ANZ National has a high number of farm loans, while Westpac is heavily exposed to commercial property.
Moody's says both sectors of the economy remain under stress.
A banking expert at PricewaterhouseCoopers, Paul Skillender, has previously said a downgrade is likely to put upward pressure on local interest rates.
That's as foreign lenders demand higher returns to compensate for higher lending risks.
Last week, Moody's downgraded the credit ratings for Australia's big four banks, of which the New Zealand banks are subsidiaries.
A Massey University banking lecturer, David Tripe, says the effect on mortgage rates will not be known till the banks borrow again on offshore markets.