Investor reaction to the Moody's Investors Service review of 17 of the world's biggest banks - including 10 of the largest banks in the UK and Europe - reveal that many of the ratings changes had been already "priced-in" to the banks' share prices.

Moodys' culled the ratings, and in some cases the outlooks, for banks in the UK, France, Switzerland and Germany, citing their heightened risk exposure.

"All of the banks affected by [the] actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities," said Greg Bauer, global banking managing director at Moody's. "However, they also engage in other, often market leading business activities that are central to Moody's assessment of their credit profiles. These activities can provide important 'shock absorbers' that mitigate the potential volatility of capital markets operations, but they also present unique risks and challenges."

Britain

The four largest banks in UK didn't escape the credit rating axe.

HSBC, RBS and Lloyds all had their ratings downgraded by one notch, while Barclays faced a two notch cut.

RBS' long-term credit rating was cut to Baa1 from A3 while Barclays was downgraded by two notches from A3 to A1 and HSBC from Aa3 to Aa2. Moody's kept the outlook of all the three firms negative.

It also downgraded Lloyds TSB Bank by one notch from A1 to A2.

While shares in all four banks traded slightly in negative territory in the first session following the announcement, the movement was nearly flat and close to the overall pattern of the FTSE 100 as investors "expected" the event to happen.

The FTSE 100, alongside all the other major European stock indices is negative by merely less than one percent.

While RBS shares traded down less than a percent at 241.10p as of 0748 GMT, the group released a statement that hit back at the action.

"The group disagrees with Moody's ratings change, which the group feels is backward-looking and does not give adequate credit for the substantial improvements the group has made to its balance sheet, funding and risk profile," said the bank.

It also estimated that RBS' downgrade could mean it needing to find an extra £9bn in collateral for its debts.

Other market watchers tended to agree, as they say the actions will induce higher lending costs, as well as hurting banks collateral.

"Banks and governments, governments and banks; investors are finding it ever more difficult to tell them apart," said Dr Pete Hahn at the Cass Business School. "Yet, the rating agencies are doing their best to point out that government support may not be what it used to be. The rating agencies' high ratings were overly generous and largely correct on the level of government support for banks pre-crisis and it seems likely they will overshoot the other way in the current turmoil. The tragedy is that, as a result of the weaker ratings, market capacity is now likely to be further reduced due to collateralisation demands on banks. Businesses need to find alternatives."

Meanwhile, Lloyd's shares traded in positive territory by less than a quarter of a percentage point at 31.28p and it said that it believes that the ratings change would have "limited impact on our funding costs and market capacity".

Similarly, HSBC stocks barely moved at was down only 0.38 percent at 557.10p after the ratings action.

Despite a two notch cut, Barclays moved only half a percent lower to 201.40p

Switzerland

While the UK bank downgrades was largely expected by investors, the downgrades of two incumbent Swiss banks provided an element of surprise.

The credit rating at Credit Suisse was axed by three notches to A2 while UBS, which Moody's had singled out for a potential three- level cut, was actually lowered by two instead to the same level of CS.

"The biggest surprise is the three-notch downgrade of Credit Suisse, which no one was looking for," said Mark Grant, managing director of Southwest Securities.

Shares in Credit Suisse travelled lower by nearly 2 percent at 17.77 swiss francs, while UBS traded mostly flat.

However, while some investors have been surprised by the substantial ratings cut, recent statements from the Swiss National Bank (SNB) should have provided some clue.

Only one week ago, Credit Suisse shares plummeted after the SNB put pressure on it to bolster its capital base by halting dividends and issuing shares in order to safeguard against the risk of an escalation of the Eurozone banking crisis.

In the central bank's annual financial stability report, SNB warned that "for Credit Suisse, given the low starting point and the risks in the environment, it is essential that it already substantially expand its loss-absorbing capital base during the current year."

The group added that "apart from the planned reduction of risk, these improvements can also be achieved in other ways, such as by suspending dividend payments, or even by raising capital on the market through share

The SNB added that despite Credit Suisse, as well as UBS, both holding more capital than its European counterparts, the banks still fall behind in capital requirements under international Basel III rules, which are coming into force in 2019.

France

In France, the downgrade of the country's three largest banks forced little movement in the stock market.

Moody's put Societe Generale, Credit Agricole and BNP Paribas to A2, after the latter two having two notches deducted and SG with one, after the ratings agency cited the risk exposure they all face in the global capital markets.

French banks are notoriously burdened with sovereign debt and have taken major steps to reduce this exposure.

Credit Agricole shares moved close to the Cac40 index movement by trading only less than one percent lower at €3.31.

Both SG and BNP Paribas also traded in tandem with the Cac40 trading pattern by less than one percent in negative territory.

Germany

In Germany, Deutsche Bank's long-term deposit rating was culled by two notches to A2 from Aa3. It is still in investment grade territory and its outlook is stable.

Moody's said "the banks long-term prospects for growth and profitability are shrinking" and added that the bank has a significant amount of capital markets business it has, which opens it up to more risk.

Despite this, Deutsche Bank shares remained little changed at - 0.90 percent at €28.53

HSBC Barclays FTSE Germany