Moody’s has downgraded the credit rating of 30 Spanish banks due to the country’s sovereign debt and declining market share of smaller banks from mergers.
Economists estimate Spain’s banks could need a bailout of as much as 100 billion euros from their high exposure to the collapsed building sector.
Ratings of the largest lenders Santander, BBVA and savings bank La Caixa were left unchanged.
The cut in ratings of the banks followed the downgrade of Spain sovereign debt rating on March 10 by Moody’s to Aa2.
The Bank of Spain has said the capital requirements of the banking system is around 15 billion euros, while Moody’s believes the figure is more likely to be between 40 billion and 50 billion euros when future losses are included.
The increasing chance that Portugal will need outside help to put its economic house in order has compounded worries about Spain.
Spain’s banks had total exposure of $98.3 billion to Portugal at the end of the second quarter of 2010 according to the Bank of International Settlement, around a third of Portugal’s foreign held debts.