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NEW YORK (

TheStreet

) -- Spanish banks may have to raise $68.77 billion - double what the government has forecasted - in order to regain market confidence, rating agency

Moody's

(MCO) - Get Moody's Corporation Report

said Monday.

"We remain cautious on the ability of the new government's plan for recapitalization to allow Spanish financial institutions to regain markets confidence, as this would very likely require a full clean-up of losses embedded in banks' balance sheets," said Moody's analyst Alberto Postigo in a note.

The analyst added that although the Bank of Spain has disclosed its exposure to real estate losses in hopes of easing investor concerns, the ¿100 billion was a "credit negative." .

Spain's banks are trying to raise capital from private investors, divesting assets and selling shares in initial public offerings in order to satisfy the capital levels required by the government.

For instance,

Banco Santander

(STD)

recently sold off its insurance operations in Latin America for $2 billion to

Zurich Financial Services

to boost capital. In addition,

Banco Financiero y de Ahorros

TheStreet Recommends

and

La Caixa

both recently

announced plans for IPOs.

S

Despite the sales, the banks are having difficulty raising cash and the Spanish government recently delayed the deadline for the banks to attract private investors by six months. The new deadline is March of 2012.

--Written by Maria Woehr in New York.

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