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Funding pressures, regulatory capital weaknesses and higher risks in the commercial real estate loan portfolios dragged Moody’s credit ratings of two sizeable banks operating in the Massachusetts market.

Moody’s downgraded credit ratings for large regional banks M&T Bank and Webster Bank, among 10 regional banks the ratings agency downgraded Monday.

The $222 billion-asset Citizens Bank, the other Massachusetts lender touched by Moody’s sweeping move, kept its “moderate credit risk” Baa1 rating for its long-term debt, but saw Moody’s judgement of its outlook turn from “stable” to “negative.”

“The negative outlook reflects Citizens’ weakened profitability amid challenging banking conditions. It also reflects the likelihood that significantly higher interest rates for a longer time period could continue to weigh on Citizens’ profitability and funding, and that negative trends in the CRE sector could weigh on asset quality,” Moody’s said.

The $203 billion-asset M&T and all its subsidiaries were downgraded, with M&T’s long-term senior unsecured debt rating dropping down to a “moderate credit risk” Baa1 rating from a “low credit risk” A3 rating.

The $70 billion asset Webster Bank also saw its long-term local and foreign currency counterparty risk rating go down to Baa1 from A3, while the long-term local currency bank deposits rating dropped from “low-risk” A2 from A1.

Since the spring bank failures due to the high-interest rate environment, sources of strain have built in the US banking sector, Moody’s said, such as the decline in stability in deposit funding, higher deposit costs, reduced loan growth, reduced pace of shifts to higher-yielding assets and increased risk associated with banks’ existing commercial real estate loans due to reduced demand in office spaces, among others.

The credit rating agency mentioned that the higher capital requirements for banks with assets beyond $100 billion such as M&T and Citizens will make these banks “more vulnerable to a loss of investor confidence” and will result in them being more reliant on higher-cost deposits and wholesale borrowing to avoid forced sale of fixed-rate securities or loans.

Moody’s said its analysts see it likely the U.S. will enter a recession “in late 2023 or early 2024.”

“The level and quality of banks’ capital will be key to their ability to withstand downside asset risks as well as absorb the costs of business model adaptation,” Moodys said.