Standard & Poor’s Ratings Service (S&P) announced on Thursday it has cut the ratings of Japanese financial institutions in the wake of its sovereign downgrade of Japan on Sept. 16.

The New York City-based credit rating agency has downgraded a total of 12 Japanese financial entities from the country’s five major banking groups — Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc., Sumitomo Mitsui Trust Bank Ltd., Norinchukin Bank, and Shinkin Central Bank.

S&P also lowered the ratings on a foreign bank subsidiary, State Street Trust and Banking Co. Ltd., and the counterparty credit ratings on 10 insurance companies.

The financial institutions’ ratings previously factored in one notch of uplift for the likelihood of government support in the event that they ran into financial trouble, S&P says. However, the sovereign downgrade has now erased the margin of uplift for the likelihood of government support, resulting in downgrades for the firms themselves.

“If a sovereign comes under stress, the regulatory and supervisory powers of that country’s government may restrict the flexibility of banks or its financial system. Moreover, banks are affected by many of the same economic factors that cause sovereign stress,” S&P says.

As for insurers, their ratings are constrained by the sovereign ratings, “because both their business franchises and assets are highly concentrated in Japan,” S&P says.