Update Moody's Investors Service has downgraded the long-term debt ratings of Australia's big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

Moody's gave the banks - Commonwealth, NAB, ANZ and Westpac - a stable outlook for their ratings after the cut.

Bank shares all lost ground on the news. For the day, CBA ended down 0.2 per cent, Westpac was off 0.1, while NAB ended up 0.1 per cent and ANZ gained 0.9 per cent.

Australia's banks have typically relied on overseas credit markets to finance much of their lending, such as for new mortgages. The ratings cut by Moody's - which brings it in line with Standard & Poor's - may make it marginally more expensive for the banks to tap funds overseas.

RBC Capital Markets economist Michael Turner doesn't expect the Moody's downgrade to have a major impact on costs for Australian borrowers. That’s because the banks have been working for some time to reduce their dependence on wholesale funding, he said.