Fitch Ratings says in a quarterly report issued today that at the end of the second quarter, 14% of global bank ratings were assigned Positive Outlooks, down slightly from the record 16% of the previous quarter.

Notwithstanding the slip in Positive Outlooks, it is still at a high level, and, with significantly fewer Negative Outlooks, the overall bias in bank ratings remains positive, the rating agency said.

The ratio of positive to negative actions has shrunk considerably in the quarter, down to two from 12.14 at the end of the first quarter. This is the lowest this ratio has been since the first quarter of 2006. Full-blown downgrades are still rare – just four in the quarter – but negative shifts in both Outlook and Watch status are perhaps the first indication that risk is picking up, albeit very modestly, Fitch said.

As in previous quarters, the proportion of Positive Outlooks is higher in emerging markets than developed markets at 16.6% compared to 12.2%, respectively. However, the upgrading of 11 Brazilian banks with a return to Stable Outlook, and removal of Positive Outlook on 16 Turkish banks, as a result of heightened political risk at the sovereign level, has helped reduce this gap by two-thirds.

Whereas sovereign factors play the major role in emerging markets, it is M&A activity that is playing an increasingly important role in the developed markets, Fitch noted. Barclays Bank is the most significant new Negative Outlook, following the launch of its bid for ABN AMRO – itself now on Positive Watch. M&A activity (or other corporate restructurings) is also playing a role in markets such as Italy, Spain and the US.

The Japanese banking system continues on its road to recovery with 17 institutions from a broad cross-section of the financial sector – from mega-banks like Tokyo-Mitsubishi UFJ, through regional banks to securities houses like Nomura and Daiwa – on Positive Outlook.