After Standard & Poor's on Monday lowered the credit ratings of 23 institutions but excluded the big four banks, Bank of Queensland and Bendigo and Adelaide Bank expressed frustration and pushed for changes to level the playing field in domestic banking.

Analysts, meanwhile, said any gains smaller banks might have received from the federal government's bank tax could be wiped out by the credit rating downgrade, which is tipped to eat into smaller banks' profits.

Bank of Queensland chief executive Jon Sutton said S&P's decision to lower the bank's rating from A- to BBB+ while leaving the big four banks' ratings unchanged was "incredibly perplexing".

S&P said its main reason for cutting the regional banks' ratings was the risk of a "sharp correction" in house prices after a sharp run-up led by Sydney and Melbourne. It excluded the big four because it assumes they would be bailed out by the government in a financial crisis.

"When you think about the big four banks, they have very large exposures to those markets of Sydney and Melbourne, and they were not affected by S&P's downgrade," Mr Sutton told BusinessDay.

"We don't have high-concentration risk in Sydney or Melbourne. That's why I find it incredibly perplexing what S&P has done and their arguments for it."

In the medium term the bank is likely to pay 5 to 10 basis points more for wholesale debt as a result of the rating cut. But he said it was too simplistic to say this would remove the competitive gain from the bank tax, which only the larger banks will pay.

Bendigo chief executive Mike Hirst noted that S&P's explanation for the downgrade included the sentence: "we consider that the four major Australian banks materially drive the system-wide risks in Australia given the collective dominance of these banks."

Mr Hirst said: "They're driving it, they hold 80 per cent of that risk, yet they were the only ones that didn't get downgraded. This is the frustration of the uneven playing field."

In response, smaller banks expect regulators will soon tweak capital rules that allow Commonwealth Bank, National Australia Bank, ANZ, Westpac and Macquarie to hold less capital for every dollar lent.

The Australian Prudential Regulation Authority will publish a paper on capital requirements in the coming months, and Mr Sutton said it was likely to deal with "risk weights" - models that allow the major banks to hold less capital against mortgages.

"There's been a lot of philosophical debate about what 'unquestionably strong' means. I would not be surprised if there are changes in risk weights for mortgages and different classes of mortgages in that discussion paper," he said.

Shares in regional lenders were hardest hit by a dip in bank stocks on Tuesday, with BoQ falling 2.5 per cent to $11.37 as Bendigo shares lost 1.6 per cent to $11.64.

Deutsche Bank analyst Andrew Triggs estimated the cut would lower Bank of Queensland's profits 2.4 per cent, and Bendigo's profits would be 1.5 per cent lower than previously estimated.

Principal at credit market consultancy ADCM Services, Philip Bayley, estimated the S&P ratings cut would raise the smaller banks' cost of issuing new three-year debt by 8 basis points. That compares with the bank levy increase of 6 basis points

"It's going to be significant for the regional banks. They are all facing cost increases, all things being equal," Mr Bayley said.

S&P on Monday played down the importance of individual banks' exposures to Sydney and Melbourne. It said a sharp fall in house prices in the country's two biggest cities would hit the broader national economy through weaker employment, economic growth, consumer sentiment and falling house prices elsewhere.

"If a sharp fall in house prices in Melbourne or Sydney were to occur, we believe that most financial institutions in Australia would be adversely affected even when they do not have significant direct exposure to these properties," S&P said.