At the same time, NLB's standalone financial strength rating (BFSR) has been affirmed but the bank's baseline credit assessment (BCA) has been lowered to ca from caa1.

Moody's said the downgrades were prompted by the assessment that the bank's credit profile has been "further weakened by the necessity of a further capital injection, ongoing material losses undermining its already weak capital base, and expectation of further losses in 2013."

NLB's loss of EUR 273m for 2012 has "eroded its capital base" even though it had already been supported by the earlier capital injection of EUR 383m in July 2012.

As a result, with a Tier 1 capital ratio of 8.77% as at the end of 2012, the bank remains below the European Banking Authority regulatory guidelines, prompting it to request an additional capital injection.

In addition, Moody's expects further losses to undermine the already weak capital base in 2013.