Fitch downgraded on Tuesday the credit rating of the Macquarie Group by two notches to A- from A. The cut was part of the rating agency's review of the largest financial institutions in the world.

While Fitch also removed the negative ratings watch on Macquarie it made in February, the rating agency downgraded Macquarie and its subsidiaries' long-term issuer default rating and viability rating. Fitch explained the move to the market-oriented nature of Macquarie's businesses and the group's reliance on wholesale funding.

"An uncertain global economic environment and increasing regulation mean that absolute returns from these businesses are likely to be subdued relative to pre-2008 levels in the short to medium term," Fitch said in a statement.

"Although Macquarie manages this exposure well, with a conservative liquidity policy and limited use of short-term wholesale funding, in Fitch's view this reliance, when combined with a more volatile earnings profile relative to that of commercial banks, is better reflected at the new rating levels," the agency added.

Patrick Upfold, Macquarie Group's chief financial officer, said the Fitch downgrade is in line with Standard & Poor's A rating for the firm which S&P reaffirmed on Dec 1, 2011.

David Liu, head of research at ATI Asset Management, said the downgrade will make it more difficult for Macquarie to complete their buyback because it will impact their cost.

Fitch acknowledged that Macquarie had been pro-active in addressing the changing economic environment through dropping some businesses, cutting costs and improving capital efficiency.

Fitch earlier also cut the credit ratings of Commonwealth Bank, Westpac and National Australia Bank.

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