Standard & Poor's Global Ratings said on Thursday it had cut its long-term credit rating on the European Union to 'AA' from 'AA+' but raised its outlook to "stable" from "negative" after the United Kingdom voted to leave the bloc.
"After the decision by the UK electorate to leave the EU...we have reassessed our opinion of cohesion within the EU, which we now consider to be a neutral rather than positive rating factor," S&P said.
The ratings agency said the Brexit move "lessens the supranational's fiscal flexibility, while weakening political cohesion."
The agency said there will be growing uncertainties on going forward, revenue forecasting, long-term capital planning and adjustments to key financial buffers of the EU.
S&P also said that its previous rating reflected its "baseline scenario was previously that all 28 member states would remain inside the EU."
European shares fell on Thursday, with a recovery from a heavy sell-off caused by Britain's vote to leave the European Union last week stalled as shares in major banks lost more ground.
The pan-European STOXX 600 index and the similar FTSEurofirst 300 index both fell by 0.6 percent. The STOXX 600 and FTSEurofirst are both down around 10 percent since the start of 2016.
The STOXX 600 was also down around 7 percent this month, and was set to post its worst monthly performance since August 2015.
Banking stocks were among the worst performers.
Shares in Deutsche Bank and Santander fell 4 percent and 2.9 percent respectively after their U.S units suffered the ignominy of failing U.S. stress tests again this year.
