Ratings agency Moody's Investors Service has revised its outlook on large Singapore banking groups from "stable" to "negative".
While the move is a sign of the increased risks banks are facing now, the revision does not indicate any serious problems at the institutions.
Moody's said in a report yesterday: "Despite the headwinds, the three large Singapore banking groups maintain very strong buffers in terms of capital, loan loss provisions and pre-provision income."
The change in the rating outlook affects DBS Bank and its parent, DBS Group Holdings, as well as OCBC Bank and United Overseas Bank (UOB).
Moody's expects a tougher operating environment here this year "and possibly beyond", one that will put pressure on the banks' asset quality and profitability.
The outlooks suggest how their ratings are likely to move over the next 12 to 18 months. They refer only to the ratings of long-term deposit, issuer and senior unsecured debt of banks.
Agencies Fitch and Standard & Poor's still maintain a stable outlook for the three local banks.
Moody's expects that "Singapore banks will report higher problem loan levels and will need to increase loan loss provisions, leading to lower bottom-line profitability".
It noted that weakening credit conditions present an increasing risk to their asset quality and profitability.
Moody's cited a 15 percentage point increase in private sector credit which, as a share of gross domestic product, rose to 130 per cent at the end of 2015, from 115 per cent at the end of 2012.
Singapore banks are also likely to meet headwinds from slowing growth in regional economies and the corporate sector, where many companies are reducing their leverage ratio, the agency said.
The banks said that they were bolstering their defences.
UOB head of investor relations Jimmy Koh said the bank's priorities of maintaining robust capital and risk management and preserving a strong balance sheet and funding base help to ensure "resilience through economic cycles".
OCBC chief financial officer Darren Tan said it has been "paying close attention" to the management of its asset portfolio and ensuring that its liquidity and capital positions remain robust.
He said: "In recognition of our sound asset quality, strong capital buffer and diversified funding profile, Moody's has affirmed our Aa1 credit rating."
DBS also said it has kept its Aa1 rating, the second-highest level. A DBS spokesman said: "We remain one of the highest-rated banks in the world, which has enabled the bank to be named Safest Bank in Asia for seven consecutive years."
Analysts say the Moody's report did not raise any new issues, and there was little cause for concern.
Nomura's South-east Asia banks analyst, Mr Jaj Singh, said: "The issues they outlined, such as slower growth and higher credit cost, have been at the forefront of investors' focus for the last nine months."
The downgrade may not have a material impact on the banks, said KGI Fraser Securities analyst He Yuxuan, as "the street has been expecting slower growth and higher loan loss provisions for the banks as the... sector enters a credit upcycle".
CIMB Research analyst Kenneth Ng noted that Singapore banks already have a large capital buffer, and "the bad debt and provisioning needs to be almost double the magnitude of the global financial crisis, before worries of capital raising become relevant at all".