Three of Australia’s big four banks have had their prized AA credit ratings downgraded by one notch because of their partial reliance on wholesale funding markets. Global ratings agency Fitch Ratings on Friday lowered the long-term issuer default ratings of Commonwealth Bank, Westpac and National Australia Bank from AA to AA- to reflect their weaker funding profile. Fitch affirmed ANZ Banking Group’s IDR at AA-, and said all four banks now have a stable outlook. The downgrades came after Fitch concluded its three-week review of the big four that started on January 30 with the agency placing the banks on rating watch negative. Fitch noted all four banks retained a reliance on wholesale funding, especially from offshore markets that left them susceptible to dislocation in those markets. “Wholesale funding, particularly when sourced cross borders, has become more vulnerable to swings of confidence, and for the major Australian banks this risk is better reflected at a ... long-term IDR of AA-,” Fitch said in a statement. The major banks have moved to improve their funding mix over the past three years and scale back their reliance on offshore wholesale term-debt markets to about 20 per cent of total funding. Fitch expects a continuing improvement of the mix, with a greater focus on deposit-taking, but said any significant improvements over the medium term would be constrained by structural impediments. These include high levels of fixed capital investment, large current account deficit, and mandatory superannuation savings weighted toward equities. On most other measures the big four banks remain among the strongest of those that Fitch rates, the agency said. Fitch’s downgrades follows those issued to a range of banks in the Asia Pacific, including the big four, by Standard & Poor’s last November when it revised its ratings criteria for banks. S&P downgraded each of the big four from AA to AA-, and cut investment bank Macquarie Group by two notches to BBB from A-. Fitch also downgraded the credit ratings of subsidiaries of CBA and NAB, including NAB’s UK unit, Clydesdale Bank plc. Clydesdale’s long-term foreign currency IDR was downgraded from A to A+ and maintained at ratings watch negative by the agency given NAB’s decision earlier in February to review its UK operations. “Earnings are likely to be subdued given a weakening outlook for the UK economy,” Fitch said. NAB’s first quarter 2012 earnings fell below market expectations because of significant margin pressure and another bad debt blow-out in its UK operations. Since then, analysts have renewed calls for the bank to offload Clydesdale and Yorkshire Banks, with UBS’ Jonathan Mott telling clients NAB could collect between STG 1.87 billion ($A2.74 billion) and STG 2.62 billion ($A3.8 billion) for the assets.