Moody's downgraded the long-term deposit and debt ratings of Suncorp-Metway but confirmed Suncorp's insurance ratings.
Although the announcement came after the share market closed yesterday, Suncorp shares slid 55c, or 10.5 per cent, to $4.71.
The Moody's action is likely to step up pressure for the sale of the group's banking operations.
Patrick Winsbury, a senior vice-president of Moody's, said the Suncorp downgrades were driven mainly by the prospect of asset quality pressures and therefore earnings pressures on Suncorp's banking arm.
Moody's downgraded Suncorp's long-term deposit and debt ratings to A1 with a stable outlook, from Aa3. It also downgraded to negative the credit ratings outlook for three of the country's biggest banks.
The long-term "Aa" ratings of Commonwealth Bank, ANZ and Westpac are now considered at risk by Moody's as the global economic downturn worsens.
The country's other major bank - National Australia Bank - is already subject to a negative outlook from the ratings agency after the disclosure last year of a $1 billion writedown on US-related mortgage securities.
"The negative outlook reflects the potential for the deepening global economic downturn to have a protracted impact on the banks' asset quality and earnings," said Mr Winsbury.
"All three banks continue to have strong credit profiles and benefit from a very high level of support from the Australian Government.
"Consequently, even in a severe downside scenario we would expect Australia's major banks to remain solidly positioned within the Aa rating band."
While the Moody's action further dented confidence in the embattled banking sector, the major banks staged a minor rally in late trading on the back of the mixed commentary from Mr Winsbury.
CBA was the hardest hit of the major banking stocks, closing down $1.29 to $28.51 while Westpac shed 59c to $16.30.
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