Some of Britain's biggest banks were among 15 major financial institutions across the globe which suffered a downgrade in their credit ratings.
Moody's cut one notch from Royal Bank of Scotland's long and short-term rating while Lloyds' long-term rating was also reduced one notch.
The downward move - which the agency announced it was considering in February - reflects fears that the banks' growth and profit prospects are declining. And it raised speculation that it could spark a rise in mortgage interest rates.
Lloyds said it believed that the change would have "limited impact on our funding costs and market capacity".
It said it was "encouraging news" given speculation over a two-point drop.
RBS criticised the "backward looking" change which it said failed properly to recognise "substantial improvements" to the group's balance sheet, funding and risk profile. Nonetheless, the Group believes the impacts of this downgrade are manageable."
Richard Lloyd, executive director of consumer group Which?, said: "This announcement will also lead to speculation that it will cause a further rise in mortgage rates. For too long banks have taken advantage of the lack of competition on the high street to increase the interest rates charged on mortgages, loans and overdrafts, with over one million consumers seeing their yearly mortgage payments increase by over £300 million with the Standard Variable Rate rises earlier this year.
"This is why we cautiously welcomed the Chancellor's recent "funding for lending" scheme. But we want to see strong safeguards in place to ensure that banks pass on this cheap credit to consumers."
A Treasury spokesman said: "All UK banks have significantly improved the strength and resilience of their balance sheets since the start of the financial crisis. More broadly, the Government's wider banking reforms - including separating retail and investment banking - will help ensure a stronger and more secure UK banking system."
A British Bankers' Association spokesman said: "UK banks have already made wide-reaching reforms to how they operate ahead of our international competitors. They are well capitalised so able to withstand future financial difficulties and have plans in place which will prevent taxpayers having to step in in the future. Their exposure to problems in the eurozone is also very limited. Moodys' assessment reflects overall concerns about the current ongoing issues in the eurozone rather than the organisations themselves."