Fitch Ratings is overhauling the ratings of several major global investment banks and a handful of European banks due to the ongoing turmoil in financial markets and regulatory reforms facing the banking business.

Overall, given these challenges, Fitch says that it believes there will be fewer banks globally whose credit profiles are consistent with Issuer Default Ratings in the ‘AA’ rating category or above, and more whose profiles are consistent with the ‘A’ category. Global universal banks and investment banks, with their relatively greater exposure to capital markets operations and reliance on (short-term) wholesale funding, are particularly affected although tensions also exist in other markets, it says.

The rating agency said that it is conducting a review of the global trading and universal banks in its rating portfolio. And, as part of that review, Fitch has placed the ratings of seven banks on Rating Watch Negative. The banks impacted by these rating actions are: Barclays Bank plc, BNP Paribas, Credit Suisse AG, Deutsche Bank AG, The Goldman Sachs Group, Inc., Morgan Stanley, and Societe Generale.

“The placement on Rating Watch Negative of these global trading and universal banks’ [Viability Ratings] reflects Fitch’s view that these institutions’ business models are particularly sensitive to the increased challenges the financial markets are facing. These challenges result from both economic developments, particularly in the euro area, as well as a myriad of regulatory changes,” it says.

Moreover, given the ongoing euro zone crisis, Fitch has also downgraded the Support Rating Floors of 12 banks (10 in the UK, one in Switzerland and one in Germany), and as a result, downgraded the ratings of four of these banks (UBS AG and Landesbank Berlin, along with Lloyds Banking Group plc and The Royal Bank of Scotland Group plc, which were downgraded earlier today).

It also placed the ratings of five major European commercial banks on Rating Watch Negative, Banque Federative du Credit Mutuel, Credit Agricole, Danske Bank, OP Pohjola Group, and Rabobank Group, citing its broader review of bank ratings, and the series of related actions on similar banks that Fitch has announced simultaneously.