LONDON, England - October 7, 2011 - Moody’s ratings agency lowered the rating of 12 UK financial institutions on Friday, saying it sees a decreased likelihood of government support for smaller institutions in particular but specifying the move does not reflect deterioration in the financial strength of the banking system.

“Moody's believes that the government is likely to continue to provide some level of support to systemically important financial institutions, which continue to incorporate up to three notches of uplift. However, it is more likely now to allow smaller institutions to fail if they become financially troubled,” Moody’s said in a statement.

In addition, Moody's downgraded nine Portuguese banks on Friday, citing the increased risk linked to their holdings of government debt.

“It’s a little bit of a catch-up for Moody’s,” said Louise Cooper at BGC Partners, adding the downgrades were overdue.