Standard & Poor's has lowered the credit ratings of Barclays, Deutsche Bank and Credit Suisse, citing new rules and "uncertain market conditions" that threaten the banks' business.
Long-term counterparty credit ratings for the three banks were cut to A from A-plus, S&P said on Tuesday.
The ratings agency also affirmed its A long-term rating and A-1 short-term rating on UBS. The outlook for all four companies is stable.
Banks are still recovering from the 2008 financial crisis, which drove some economies into recession and spawned new regulations and legal probes.
The four European banks were among the most exposed to proposed rules that could reduce revenue from trading and investment banking operations, the ratings firm said.
"We consider that these banks' debtholders face heightened credit risk owing to the industry's tighter regulation, fragile global markets, stagnant European economies and rising litigation risk stemming from the financial crisis," S&P said.
A spokeswoman for Deutsche Bank in New York declined to comment, as did spokesmen at Credit Suisse and Barclays.
S&P maintained its ratings for UBS because it considers it to be "the most active bank in reducing its exposures to investment banking". UBS, Switzerland's biggest bank by assets, said in October last year it would cut about 10,000 jobs and retreat from capital-intensive trading businesses.
Regulations that could hurt profit include the Volcker rule in the United States, which seeks to restrict banks from wagering on trades with shareholders' cash, and new European Union rules on bonuses and proposed US rules for foreign banks, S&P said.
The agency cut Barclays, Britain's third-largest bank by market value, in part because of its dependence on investment banking revenue. The bank was also regulated by British authorities at the "forefront of regulatory change", S&P said.
Deutsche Bank was facing "rising risks" in its investment banking operations, S&P said.
The biggest German lender and Barclays would both have to grapple with tougher capital and liquidity requirements for foreign banks operating in the US, which could crimp profit, it said.
Credit Suisse, the second-biggest Swiss bank, got about half of its revenue from investment banking, S&P said. While the bank had taken steps to improve its risk and increase capital, it faced a "volatile revenue and earnings stream".
Banks have been forced by regulators to set aside more funds to protect against potential losses under the Basel III rules. While this forced investment banks to become less risky, they were still "highly leveraged institutions" that continued to face litigation and business risks, S&P said.