Spain's battered banks have taken another hit, this time in the form of a sweeping downgrade by Moody's.
The rating agency said that it is cutting its views on the debt issued by 28 Spanish banks, including international heavyweights Banco Santander and Banco Bilbao Vizcaya Argentaria.
The Spanish government's fragile finances are making it more difficult for that country to support its lenders, according to Moody's. And it says the banks are vulnerable to further losses from Spain's real-estate bust.The announcement late Monday from Moody's Investors Service came on the same day that Spain's government formally asked for help from its European neighbors in cleaning up its stricken banking sector. The request left many questions unanswered, including how much Spain would ask for out of the $125 billion loan package it has been offered. That uncertainty over Spain led to losses Monday in global stock markets. Bond investors, meanwhile, pushed Spain's borrowing costs higher, a sign of wilting confidence in the country's ability to support its banks. The downgrades reflect Moody's dimming view on the ability of the Spanish banks to repay their debts. Moody's said the lower ratings stemmed from its having downgraded the Spanish government's credit rating by three notches earlier this month. A downgrade usually means that banks will have to pay more to service their debt. Investors demand higher interest for riskier debt implied by lower credit ratings. Spain formally asked the European Union on Monday for rescue loans to help clean up its troubled banking industry. The Spanish economy, the fourth-largest of the 17 countries that use the euro currency, is suffering from the aftershocks of a real estate bust that has devastated families as well as banks. Unemployment is nearly 25 percent. The Spanish government's financial fate is intertwined with that of the country's banks. Two-thirds of the government's bonds are owned by Spanish banks, pension funds and insurance companies.
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