Ratings agency Moody's has revised downwards its outlook on British banks.

Moody's Investors Service says new regulations designed to prevent taxpayers having to stump up funds to rescue failing banks make them more risky investments.

The agency said it had downgraded its view of the sector to 'negative' from 'stable'.

It cited plans by Britain's financial regulator to introduce new rules for the rescue of failing banks and to force lenders to ring-fence their retail operations from riskier investment banking operations, which could be allowed to fail.

In the past, British banks had benefited from an implicit guarantee that the government would not allow them to fail.

The new regime would see bondholders and big depositors take hits when large banks need rescuing.

Britain pumped a combined £66 billion pounds into Royal Bank of Scotland and Lloyds Banking Group to prevent their collapse during the 2008 financial crisis.