In the wake of its one-notch downgrade of Australia's Big Four banks, along with a dozen smaller retail and mutual banks, Moody's Investors Service has downgraded the long-term ratings of the New Zealand subsidiaries of Australia's Big Four banks. In short: ANZ Bank New Zealand, ASB Bank, Bank of New Zealand, Westpac New Zealand have all been dropped from Aa3 to A1. The downgrade follows Moody's decision to downgrade the long-term deposit ratings to Aa3 (down from Aa2) of their respective Australian parents: Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation. "A material weakening in the financial fundamentals of the New Zealand banks would also be negative for their ratings," the rating agency warned. However, Moody's also acknowledged that the four New Zealand banks had strong stand-alone financial profiles. "The banks' asset quality is currently very strong while capital remains robust. "These favourable characteristics provide the four New Zealand banks with a strong buffer to withstand rising risks in the housing market as household leverage and house prices continue to rise, increasing sensitivity to employment shocks, or an eventual rise in interest rates," Moody's stated.