On Monday, Moody’s Ratings downgraded the long-term ratings of several of the largest banks in the United States, including JPMorgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), and Wells Fargo & Company (NYSE:WFC).

This decision was driven by the weakened prospects of federal support following the downgrade of the U.S. sovereign rating announced on Friday.

This action represents an unusual setback for the highest tier of the U.S. financial system and may lead to increased borrowing costs and regulatory scrutiny for institutions classified as systemically important.

Moody’s adjusted the ratings for deposit instruments, senior unsecured debt, and counterparty risk assessments associated with key subsidiaries and branches of these banks from Aa1 to Aa2.

Previously, these ratings included a notch of uplift associated with the government’s Aaa rating, which Moody’s no longer considers entirely credible following the recent downgrade of U.S. sovereign debt to Aa1.

Moody’s commented, “The downgrade of the U.S. Government’s rating indicates that it possesses reduced capacity to support the nation’s globally systemically important banks.”

The downgrades executed on this occasion reflect the removal of this governmental support notch in the ratings and assessments affected.

Despite the downgrade, JPMorgan Chase, recognized as the largest U.S. bank by assets, maintained a positive outlook, which reflects its substantial capital position and enterprise strength.

Moody’s noted that “these positive outlooks continue to reflect the commanding position of JPMorgan’s franchises and its strong capital levels,” indicating the possibility of future upward revisions, contingent upon sustained solid fundamentals.

Conversely, Bank of America and Wells Fargo now maintain stable outlooks on their long-term deposit and senior unsecured ratings, having shifted from negative outlooks, consistent with their overall financial profiles.

Moody’s reported that their ratings pertain to moderate assumptions of governmental support, in addition to specific metrics related to profitability, capital reserves, and risk management practices.

Other prominent banks, including Bank of New York Mellon (NYSE:BK) and State Street Corp (NYSE:STT), also experienced downgrades in portions of their debt structures; however, they remain positioned at the upper end of Moody’s rating scale.

Notably, Citigroup Inc (NYSE:C), Goldman Sachs Group Inc (NYSE:GS), and Morgan Stanley (NYSE:MS) were not included in this rating action, having already removed their sovereign-linked rating uplift and maintaining stable outlooks.

While Moody’s affirmed the “Strong+” macro profile of the U.S. banking sector, the reassessment of sovereign support could influence market perceptions regarding the safety net that underlies the nation’s financial infrastructure.

Analysts caution that although the immediate financial implications may be limited, the dynamics of institutional funding and capital planning may come under increased scrutiny.