UK bank stocks have been hit following a downgrade to 12 financial institutions by the credit ratings agency Moody's.Lloyds TSB, Santander UK and the Co-Operative Bank were downgraded one notch, while Nationwide and RBS went down two levels.Smaller institutions, including Clydesdale Bank were also hit.The reasoning for the downgrade was that Moody's wanted to reflect the ending of the UK government's implicit guarantee for all banks. It makes clear in its statement that the downgrade is not a comment on the stability of the British banking system as a whole.RBS shares were down 2% on the news while Lloyds has fallen around 2.5%.In response to the downgrade RBS said it "has already completed its wholesale funding requirements for 2011 and continues to make excellent progress in strengthening key balance sheet measures in the second half to date."A statement added:"We are disappointed that Moody's have not acknowledged the progress we have made in strengthening the bank's credit profile."BS