UPDATE 1-Moody's downgrades outlook on UK banks to negative

* UK bank outlook changed to negative from stable

* Cites new regulations to prevent taxpayer bailouts (Adds further details, comments from analyst)

LONDON, Aug 5 (Reuters) - Moody's Investors Service hasrevised down its outlook on British banks, saying newregulations designed to prevent taxpayers having to stump upfunds to rescue failing banks make them more risky investments.

Moody's said on Tuesday it had downgraded its view of thesector to 'negative' from 'stable', citing plans by Britain'sfinancial regulator to introduce new rules for the rescue ofailing banks and to force lenders to ring-fence their retailoperations from riskier investment banking operations whichcould be allowed to fail.

In the past, British banks had benefited from an implicitguarantee that the government would not allow them to fail. Thenew regime would see bondholders and big depositors take hitswhen large banks need rescuing.

Britain pumped a combined 66 billion pounds($111.3 billion) into Royal Bank of Scotland and Lloyds Banking Group to prevent their collapse during the 2008 financialcrisis.

Moody's said the new rules "are designed to prevent the useof taxpayer funds to support failed institutions and tofacilitate the going-concern loss-absorption of creditors,including senior unsecured bondholders".

"The key driver of the change in outlook to negative for theUK banking system is that the UK government is now able tofinalise the secondary legislation to implement the structuralreforms relating to the UK resolution and bail-in regime and therelated ring-fencing framework," said senior Moody's analystCarlos Suarez Duarte.

(1 US dollar = 0.5929 British pound) (Reporting by Matt Scuffham; Editing by Erica Billingham)