Ratings agency Standard & Poor's has downgraded Ireland's ratings by one notch.

The agency lowered its long-term ratings to A- from A and its short-term ratings to A-2 from A-1, and said it was keeping its negative outlook.

"The downgrade follows Standard & Poor's revision of the Irish Banking Industry Country Risk Assessment (BICRA) to Group '6' from '4'," S&P sovereign credit analyst Frank Gill said.

S&P also cut the rating on AIB, Anglo Irish Bank, Bank of Ireland, and Irish Life & Permanent, and lowered its rating on foreign-owned banks active in Ireland, including KBC Bank Ireland and Ulster Bank..

The agency said it was of the opinion that both the ability and willingness of the Government to provide "extraordinary support" to the institutions had weakened, and the banks had been unable to source term funding, even when government-guaranteed, for some months.

"Irish domestic banks currently depend almost entirely on the ECB to refinance expiring market debt," Mr Gill wrote in a note.

"Were the labour market to deteriorate further, a rise in the level of delinquencies in the domestic banks' mortgage books could result in higher new capital requirements than we presently assume."

S&P is the last of the three main rating agencies to retain an 'A' grade for Ireland. Moody's cut Ireland's rating by five notches in December to Baa1, three grades above junk, with a negative outlook, also citing uncertainty about the cost of the bank bailout. In the same month, Fitch cut its rating by three notches to BBB+ with a stable outlook.