Credit rating agency Fitch has said the bank stress tests undertaken last week are 'an important step' in restoring confidence in the banking system.
But it also warned that a medium-term funding solution may be needed to full restore market confidence in Irish banks, as they were still relying too much on short-term funding from central banks.
Fitch made the comments as it announced a series of changes in its ratings of Irish banks' debt following the tests.
The agency has lowered Irish Life & Permanent's debt rating, while it also downgraded the subordinated debt of AIB, Bank of Ireland and the EBS Building Society.
Fitch has also warned that it is likely to downgrade the Government-guaranteed debt of AIB, Bank of Ireland, EBS, Anglo Irish Bank and Irish Nationwide.
The agency said it had made the IL&P move due to the likelihood that the Government will take a majority stake in the bank given its capital requirement of €4 billion. Fitch also put Bank of Ireland on review for a downgrade because of the tough challenge it faces to meet its targets under the stress tests. But it said Bank of Ireland still had the highest rating of the Irish banks.
On Friday Fitch had said that it is likely to lower Ireland's credit rating in the near future.
Fitch said it had placed Ireland's current BBB+ rating on what it calls 'credit watch negative', which means a downgrade is more likely.
Meanwhile, another rating agency, Moody's, has said the €24 billion earmarked for Ireland's four remaining banks from last week's stress tests is negative for the country but positive for the banks.
'The capital increase is a clear credit positive for the banks,' the ratings agency said in a note.
But it added that the additional costs to the Government of injecting money into the banks are negative for Ireland's creditworthiness.
Moody's currently rates Ireland Baa1 with a negative outlook, meaning that a downgrade is possible in the future.
Last week another rating agency, Standard & Poor's lowered its rating on Ireland's debt, but said the outlook was now stable, adding that the bank stress tests were 'credible'.
