NLB's and NKBM's deposit ratings were downgraded to Ba2 from Ba1, while Abanka's was reduced to Ba3 from Ba2.

Moody's also downgraded NKBM's standalone bank financial strength rating (BFSR), and remapped the other two banks' standalone credit strength within the relevant BFSR category.

The downgrades reflect the sharp asset-quality deterioration in the banks' loan portfolios with the aggregate level of non-performing loans rising to over 17% in 2011 from 14% in 2010, Moody's said on Wednesday.

The agency also maintains that due to high provisioning needs, the banks' capital bases are very weak and insufficient to absorb any sizeable losses in 2012.

The ratings have been placed on review for further downgrade to assess the implementation of the banks' capital raising plans; the degree to which the banks can successfully stabilise the formation of new problem loans; and the government's ability and willingness to provide timely and sufficient support to these banks, in case of need.