Moody's Investors Service has downgraded three Dubai-based banks, including the emirate's largest Emirates NBD, on concerns about problem loans.
The rating agency also put a fourth bank on watch for a possible downgrade owing to high levels of non-performing loans (NPLs).
Moody's lowered long-term ratings for Commercial Bank of Dubai and Emirates NBD to Baa1 from A3, Moody's said in a statement.
Mashreqbank's rating was also cut to Baa2 from Baa1 while all three were given a negative outlook.
The rating of a fourth lender, Dubai Islamic Bank, was put on watch for a possible downgrade.
A statement read: "Despite an improvement in the overall operating environment in Dubai, especially in the core sectors of trade, retail, tourism and transport, Moody's believes that Dubai-based banks continue to face persistent asset quality pressures, which emerged at the start of the crisis four years ago."
It added that problem loans levels remained elevated in the range of 15-17 percent, which is well above the average of Gulf Co-operation Council (GCC) banks at 6.1 percent.
Moody's said it expects problem loan levels to remain elevated over the coming quarters, driven by "exposures to large, stressed, government-related issuers" and "legacy corporate impairments, primarily real-estate-related".
"The delayed recognition of these problem loans is continuing to pressure asset quality of the affected banks, and Moody's believes that a limited reduction in headline NPLs is likely over the near term," the statement added.
The action comes despite a revival in Dubai's economy after several years of stagnation in the wake of the financial crisis.
Trade and tourism have picked up, but many banks are still saddled with large non-performing loans.