KIEV, Sept. 27 – The signing of Ukraine Association Agreement with the European Union will damage Ukraine's relations with its largest trading partner - Russia, eventually weakening its banks' capitalization, asset quality and liquidity, according to Moody's Investors Service.

The agency recently downgraded Ukraine's 'B3' sovereign rating to 'Caa1' with the possibility of further downgrade, along with the ratings of 13 banks, taking into account not only the potential deterioration of relations with Russia, but also the condition of external liquidity and foreign exchange reserves of the country, as well as high the uncertainty of funding programs of the International Monetary Fund.