The government is more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute, the ratings agency said.
The action concludes a three month review that began in June when the ratings agency said the banks faced a potential downgrade.
Moody's downgraded Bank of America's long-term senior debt rating to Baa1 from A2 and its short-term debt rating to Prime 2 from Prime 1.
Moody's said the long-term outlook on the bank's senior ratings remains negative.
Bank of America shares were down 3 percent at $6.69 after the announcement. Citigroup shares declined 0.1 percent at $26.89 and Wells Fargo shares were up 1 percent at $24.92.
(Reporting by Joe Rauch; editing by Gunna Dickson and Andre Grenon)