Moody's downgrades Italian banks, outlook negative

Moody's Investors Service downgraded the long-term debt and deposit ratings for 26 Italian banks on Monday, citing the country's recession and rising bad debt levels.

The banks were all downgraded by at least one notch, and for some, by as many as four notches, Moody's said, adding all of the banks affected have a negative outlook.

"The ratings for Italian banks are now amongst the lowest within advanced European countries, reflecting these banks' susceptibility to the adverse operating environments in Italy and Europe," Moody's said in a statement.

The ratings agency cited a return of Italy's economy to recession, government austerity measures that are hurting demand, rising problem loans and restricted access to market funding as among the factors behind its downgrades.

Unicredit and Intesa Sanpaolo - Italy's two biggest banks - were both given deposit ratings of A3 and a standalone bank financial strength rating of C-. Unicredit's credit assessment was baa2 while that of Intesa Sanpaolo was baa1.