The organisation stated it will be unlikely that the nation's government will be able to offer support should another financial failure occur in the future.
Royal Bank of Scotland - which was founded in 1727 - and Nationwide Building Society endured a drop of two notches, while Santander UK, Lloyds TSB and Co-Operative Bank each fell by one.
In addition, a number of smaller financial institutions saw their levels slashed by between one and five levels.
Michael Symonds, a credit analyst at Daiwa Capital Markets Europe, told Bloomberg: "Moody's has pulled the trigger a little early. The escalation of the sovereign and banking crisis [will] result in a broad government-backed recapitalisation of the continentâs banks."
Moody's added that guidance from the Bank of England, the Treasury and the Financial Services Authority has suggested struggling lenders should not expect a bailout from the taxpayer in the future.
By Asim Shah