The size and interest rates of the loans likely will be discussed at the EU summit this week.

Investors are concerned that beyond a rescue for its troubled banking sector, Spain itself may ultimately need a full country bailout like Greece, Ireland and Portugal.

Steep losses stung stock markets on both sides of the Atlantic Monday. The Dow Jones industrial average dropped 138 points to close at 12,502.66, a loss of 1.1 percent. The broader Standard & Poor's 500 index fell even more, 1.6 percent.

In Europe, Britain's FTSE 100 stock index fell 1.1 percent, France's CAC-40 slumped 2.2 percent, while Germany's DAX dropped 2.1 percent. The selling spilled over to Asian on Tuesday, with Nikkei 225 index fell 0.8 percent and South Korea's Kospi was 0.2 percent lower in early trading.

Many analysts believe big banks, including those in the U.S., would be the first to feel the hit of a freeze-up in Europe's financial system if Spain isn't able to convince bond markets that it can rescue its hobbled banks.

The uncertainty pushed borrowing costs higher for Spain's government on Monday. Its stock market plunged 3.7 percent.

The other 23 banks downgraded by Moody's are Caja Laboral, Banca March SA, Caja Rural de Navarra SCC, Caixa Bank, Instituto de Credito Oficial, Banco Cooperativo Espanol SA, Banco Sabadell SA, Kutxabank SA, Unicaja Banco SA, Banco Pastor SA, Confederacion Espanola de Cajas de Ahorro, Caja Rural de Granada SCC, Bankoa SA, Liberbank SA, Ibercaja Banco SA, Cajamar Caja Rural SCC, Ahorro Corporacion Financiera SV SA, Banco CEISS, Catalunya Banc SA, NCG Banco SA , Banco CAM, Dexia Sabadell SA and Banco de Valencia SA.

__

AP Business Writer Seth Sutel contributed to this story.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

If you liked this article you might like

How to Live Just Like Billionaire Warren Buffett

Bank Stocks Move Higher Ahead of Federal Reserve Meeting

How to Invest Like Billionaire Warren Buffett

All Eyes on the Godfather of Central Banking as Fed Has Huge Meeting This Week

Financials Trade Close to Flat as Investors Await Clarity From the Fed