Standard & Poor’s has cut six Italian covered bond issuers and affirmed the ratings of three others as well as UniCredit’s German and Austrian arms as part of negative rating actions on 24 Italian banks.

The rating actions were the result of a further worsening of the operating environment for Italian banks that is beyond that previously anticipated by the rating agency.

“In our opinion, renewed market tensions in the euro-zone’s periphery, particularly in Italy, and dimming growth prospects have led to further deterioration in the operating environment for Italian banks,” said S&P, adding that developments are “significantly different” from the expectations it had previously incorporated into its ratings on Italian banks.

It expects funding costs to increase noticeably and that these are likely to lead to tighter credit conditions and weaker economic activity in the short to medium term.

Covered bond issuers’ ratings were cut as follows: Banca Monte dei Paschi di Siena from A- to BBB+; Banco Popolare from A- to BBB; UBI from A to A-; BPM, Banca Carige and Credito Emiliano from A- to BBB+.

The ratings of Intesa Sanpaolo, Banca IMI, UniCredit SpA, UniCredit Bank and UniCredit Bank Austria were affirmed at A, on negative outlook.

The rating actions follow downgrades of other Italian banks in September after S&P cut their sovereign’s rating from A+ to A.

S&P also lowered its Banking Industry Country Risk Assessment (BICRA) on Italy from Group 2 to Group 3, and lowered the economic risk score, which is a BICRA component, from 2 to 3.

The ratings of 22 out of 43 Italian financial institutions carry negative outlooks, according to S&P.