Moody's Investors Service on Thursday downgraded the long-term debt and deposit ratings for 16 Spanish banks including Banco Santander, the euro zone's largest bank, citing economic weakness and the government's reduced ability to support troubled lenders.
Moody's said in a statement that the main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes.
The agency said the debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.
Thursday's move came after Moody's downgraded 26 Italian banks on Monday, including Italy's largest lenders Unicredit and Intesa Sanpaolo, citing their vulnerability to Italy's recession and the latest troubles in the currency union.
Spain is struggling to fix a crisis in its banking sector, which is now undermining hopes of a recovery in the recession-hit nation. The country has the highest unemployment rate in the 17-nation bloc.
The Spanish economy shrank 0.3 percent in the first quarter of 2012 as well as the final three months of last year, implying a technical recession. The European Commission has forecast Spain to contract 1.8 percent this year and 0.3 percent in 2013.
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