Moody’s downgrades 16 Spanish banks
Moody’s Investor Service carried out a sweeping downgrade of 16 Spanish banks, including Banco Santander, the Eurozone’s largest bank, citing a weak economy and the government’s reduced ability to support troubled lenders.
All the banks’ long-term debt ratings were downgraded by at least one notch, and some suffered three-notch cuts.
Spain’s banks, awash in bad loans after a real estate boom went bust, are at the heart of the euro zone debt crisis because markets fear a state bailout would put a severe strain on the country’s already stretched public finances.
Spain relapsed into an economic recession in the first quarter and likely faces a prolonged slump as the government tries to shrink its budget deficit by slashing spending.
“Amidst the ongoing euro area debt crisis, the Spanish government’s rising budget deficit and the renewed recession, sovereign creditworthiness has declined,” the ratings agency said. “This decline is a driver of today’s bank rating actions.”
Moody’s had cut Spain’s sovereign rating by two notches to A3 in February, placing it in the middle of its investment grade rating scale. It maintains a negative outlook on the credit.