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Ratings
agency Moody's has cut the ratings of 28 Spanish banks following a June 13
downgrade of Spain's sovereign rating by three notches.
The banks'
long-term debt and deposit ratings have been downgraded by one to four notches.
The rating of Bankia, one the country’s largest banks, has been cut to junk
status.
Moody’s
cited two main factors behind the move: the agency’s assessment of Spain's
reduced creditworthiness, and an “expectation that the banks' exposures to
commercial real estate (CRE) will likely cause higher losses, which might
increase the likelihood that these banks will require external support.”
Spanish
banking problems have become the major problem for the euro zone after the
collapse of the Spanish housing sector in 2008 created a huge number of bad
debts.
The Spanish
government has formally requested European aid of up to €100 billion for its
troubled banking sector.
“The final
amount of the financial assistance would be estimated later but should be
enough to cover all the banks' needs and add some buffer from potential risks”,
the country’s Economy Minister Luis De Guindos said in the letter to Eurogroup
head Jean-Claude Juncker.
The funds
will be made available to Spain’s own bank bailout fund, the FROB, and then
will be transferred to the banks, according to de Guindos. Further details will
be announced July 9 as an official a Memorandum of Understanding for the package
will be issued.
Meanwhile
independent auditors revealed the results of a check on Friday saying Spain's
banks would need about 62 billion euros in the worst case scenario, far less
than 100 billion package asked for by the Government.
On June 13
Moody's slashed Spain's sovereign credit rating by three notches from A3 to
Baa3, and said it had placed the country "on review for further
downgrade."
On Monday
the yield on the country's 10-year bonds has surpassed 7 percent, the level
that pushed Ireland, Portugal and Greece to the breaking point, although it now
has fallen back to a still alarming 6.5 percent or so.
(rt)
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