In a blow to the Australian banking industry, Moody's Investors Service downgraded the debt ratings of the country's four largest banks, citing their dependence on global lending markets.

A downgrade to Aa2 from their previous investment grade rating of Aa1- one notch below Moody's top rating- comes as ratings agencies around the world step up their reviews of the global banking system following the 2008 collapse of Lehman Brothers and subsequent backlash against the ratings industry. In Australia, the move coincides with growing worries that rising interest rates will crimp some parts of the economy and banking profits.