Rating agency Moody's Investors Service on Monday downgraded 26 Italian banks after lowering the credit ratings of the country by a notch in mid-February. Moody's said the ratings for Italian banks are now amongst the lowest in advanced European countries, reflecting the banks' susceptibility to the adverse operating environments in Italy and Europe, primarily amid Italy's double-dip recession since early 2012. Today's rating actions follow Moody's decision to review for downgrade the ratings for 114 European financial institutions, including Italian banks. Some banks downgraded today had been placed on review for downgrade on other dates. The lenders being affected by today's downgrades primarily include UniCredit SpA and Intesa Sanpaolo SpA , which together account for almost one third of the Italian market by assets. It also includes the third-largest bank Banca Monte Dei Paschi, the fourth-largest bank Banco Popolare, and the fifth-largest bank Unione di Banche Italiane. The 26 banks' long-term debt and deposit ratings were downgraded by one to four notches. The debt and deposit ratings declined by one notch for ten banks, two notches for eight banks, three notches for six banks, and four notches for two banks. Meanwhile, all of the banks affected by the ratings cut have a 'negative' outlook, which may increase the likelihood of future downgrades. The outlook reflects the negative outlook on the Italian government bond rating. UniCredit, the country's largest bank by assets, had its long-term debt rating lowered by a notch to A3, and Intesa Sanpaolo, the second-largest bank, was also downgraded to A3 from A2. Moody's has attributed the increasingly adverse operating conditions in Italy, mounting asset-quality challenges and weakened net profits as well as restricted access to market funding as the key issues affecting the banks. Meanwhile, Moody's cited the substantial liquidity support provided by the European Central Bank (ECB) as the reason for significantly reduced near-term default risk. In mid-February, Moody's downgraded Italian sovereign debt rating to A3, four steps above junk, from A2 with a 'negative' outlook. Moody's also downgraded the ratings on five other Eurozone countries, mainly citing the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework. UniCredit closed Monday's regular trading session in Milan at 2.67 euros, down 0.14 euros or 4.91% on a volume of 89.36 million shares, and Intesa Sanpaolo closed at 1.03 euros, down 0.04 euros or 3.55% on a volume of 124.79 million shares.