The ratings agency Moody’s has cut the credit ratings of sixteen Spanish banks, including two of the largest, Banco Santander and BBVA. Ten of the 16 banks were also put on negative credit watch, meaning that further downgrades are possible.
The move came after shares in struggling lender Bankia fell another 14%, almost halving in value this month. At the same time, Bankia and government officials are fiercely denying rumours that account holders have been removing their funds from the troubled bank.
Fears about losses at Spanish banks has hit shares across Europe. According to Moody’s, the Spanish government, due to its borrowing difficulties, has had its ability to provide support to the banks ‘reduced’. In addition, the Spanish government has had to pay higher rates of interest to borrow money on the markets, leading some to believe it will need a bailout.
Moody’s also cut the ratings of four of Spain’s regions – Catalonia, Murcia, Andalucia and Extremadura – saying that there is only a ‘low probability’ that the regional governments will be able to meet the 2012 deficit targets.