International credit ratings agency Fitch has downgraded New Zealand's big four banks, alongside their Australian parents, by one notch to A+ from AA-.

Fitch says the downgrades reflect the significant impact government measures to limit the spread of the coronavirus will have on the four banking group's Australian and New Zealand operations. Fitch has also placed a negative outlook on the ratings, reflecting its assessment that there remains considerable downside risk to its base case that could result in a further deterioration of the banks' financial profile beyond its expectations over the next two years.

The downgrades for ANZ NZ, ASB, BNZ and Westpac NZ, alongside those of their Aussie parents the ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank and the Westpac Banking Group, means their ratings remain equalised with those of their parents.

Fitch expects the Australian economy to contract by over 2% in 2020, with unemployment averaging 7.7% for the year. Fitch says the NZ subsidiaries remain a key and integral part of their respective banking groups, with strong integration across management, risk frameworks and internal systems.

Lower credit ratings can increase borrowing costs for a rated entity. See credit ratings explained here.

In response to the downgrade ASB said its capital and funding positions remain strong.

"As at the last reported disclosure date, 31 December 2019, ASB’s Tier 1 Capital Ratio was 11.7% versus a regulatory minimum of 4.5%. As at 31 March 2020, ASB’s Core Funding Ratio was 89.5% versus a regulatory minimum of 50%," ASB said.

Here's a statement from Fitch.