The Spanish banking sector was qualified by Moody's Investors Service Inc. The result was not good enough and in addition the pressures exist in Iberian banks following the collapse of Portugal’s minority government overnight.
The crisis in Portugal, which is widely seen on the brink of requesting a European Union bailout, may also have a limited effect on Spanish banks. According to estimates from the Bank of International Settlements, Spanish banks are the most exposed to possible losses in Portugal, as they account for $109 billion out of $322 billion in total exposure of foreign banks in the country.
In relation with the result, the downgrade comes for the Spain’s sovereign debt and all the weak banks. It also reflects the expectation of a weaker support environment for banks across Europe.
The report has further added 30 banks, to make a thorough decision on their ratings. Moody’s downgraded Spain’s sovereign rating one level on March 10 to Aa2 while warning of further downgrades on the likelihood the country’s bank restructuring efforts will cost double its 20-billion euro forecast. The ratings of the country’s three largest banks - Banco Santander, BBVA and La Caixa - were not affected by the action.
European stocks closed higher the day that the report was published. Britain's FTSE 100 added 1.5%, the DAX in Germany gained 1.9% and France's CAC 40 rose 1.4%.
