Some of Britain’s biggest banks are reportedly facing credit rating cuts as early as tonight in a move which will stretch lenders’ already taut finances.

Royal Bank of Scotland, Lloyds Banking Group and Barclays are all in line for a downgrade by ratings agency Moody's over fears the eurozone crisis threatens their stability.

The move would ramp up bank funding costs, which in turn could be passed on to the consumer in the form of higher mortgage rates and charges.

The cuts are part of a wider review by Moody's of the global banking sector that Sky News said is likely to be unveiled tonight after the US market closes.

The downgrades, which are expected to range in scope from one notch to three notches, will follow joint efforts by the Bank of England and Treasury to boost cash flows in Britain's banks through a multi-billion pound cheap loan scheme.

The banking industry has been hit by higher funding costs as the euro zone troubles escalated and has been hoarding money for fear of another worrying phase in the crisis.

The Bank held its first auction under the new scheme yesterday, offering £5 billion in cheap loans with a rate of 0.75 per cent, which was entirely taken up by the country's lenders.

Moody's, which previously warned in February that rating cuts were on the cards for Britain's banks, is likely to take a more pessimistic view on the creditworthiness of lenders in the wake of the euro zone crisis.

There is no certainty that the move will be unveiled tonight and could be delayed.

PA