The ratings agency Moody’s has cut the credit rating on 28 of Spain’s 33 banks by between one to four notches.
The downgrade follows a cut of Spain’s sovereign rating to just above junk status earlier this month.
Yesterday Spain’s government formally requested up to 100 billion euros of funds to support its banks which have been exposed to large losses in connection with Spain’s real estate sector.
Spain’s Treasury Secretary, Cristobal Montoro expalined:
“The restructuring of the banking system is an absolute priority for the government and for our citizens. We need to have credit in our banks in order to grow and create employment. Therefore we have to use the instruments at hand , especially the European ones, to make that restructuring easier and to reinvigorate such a vital sector of the Spanish economy.”
By mid afternoon with Moody’s downgrade widely anticipated, the Dow Jones had followed markets around the world with a one to two per cent drop.
All eyes are now on yet another EU summit later this week in which a new stimulus package is to be discussed.