Credit rating agency Moody's has sharply cut the Irish Republic's debt rating and warned more downgrades could follow.
The rating was slashed by five notches to Baa1 from Aa2.
It followed Fitch's move last week to also strip the country of its "A" credit rating.
On Thursday, the International Monetary Fund (IMF) approved a three-year loan of 22.5bn euros ($30.1bn; £19bn) for the Republic.
The funds form the first part of the IMF's contribution to the EU and IMF rescue package for the Republic totalling 85bn euros.
The Irish Republic is trying to reduce its high public deficit and large overall debt.
It is also having to shore up the country's banks, which have been left with huge bad debts following the collapse of the country's property market.
On Friday, Lloyds Banking Group said that a further 10% of its £26.7bn Irish loan portfolio would become impaired by the end of 2010.
As a result, the bank said it would increase its impairment charge relating to Irish loans to £4.3bn for 2010.
"This would result in an increase in provisions as a percentage of impaired Irish loans to approximately 54% at the 2010 year end," Lloyds said.
Lloyds shares were down 6.2% shortly after the announcement, but then recovered slightly to stand down 3.4%. Shares in Royal Bank of Scotland were down 4.8% while Barclays was 1.6% lower.
The Republic's bail-out followed a 110bn-euro rescue package for Greece, with concerns also mounting over the finances of countries including Portugal, Italy and Spain.
Such worries have led EU leaders to agreed to set up a permanent mechanism to bail out any member state whose debt problems threaten the 16-nation eurozone.
Earlier this week, Moody's said it may downgrade Spain's credit rating - warning of problems the country faces in refinancing debts next year within local and central government, and at its banks.
Madrid denies similarities between the Irish economy and its own, despite worries over Spain's property and banking sectors.
Figures released on Friday by the country's central bank showed that bad loans held by Spanish banks in October hit their highest level since January 1996.
As a condition of receiving the EU-IMF rescue package, the Irish government has had to impose big spending cuts, which has sparked a number of protests.
Moody's said that the Republic's 15bn euro budget-trimming plan meant its economic prospects were uncertain.
The cutbacks were likely to hit domestic demand - as citizens had less cash to spend - and therefore be a strain on the country's prospects of recovery, the agency added.
"Should Ireland's adjustment capacity prove to be insufficient to stabilize debt metrics in the foreseeable future, a further rating downgrade would follow," Moody's said.
Analysts at Dublin-based Glas Securities said that, while a downgrade had been expected, the severity of it was "surprising".
Official figures from the Irish Republic, released on Thursday, showed that its economy returned to growth between July and September, expanding by 0.5% on the previous three months.