Moody's Cuts Ratings on 28 Spanish Banks

A file picture dated 13 July 2011 shows the Moody`s logo outside the offices of Moody`s Corporation in New York, New York, USA. Photo by BGNES

Moody's Investor Service on Monday cut its credit ratings on 28 Spanish banks, only a few hours after Madrid officially asked the EU for a bailout for its troubled banking sector.

The agency specified that the weakening financial condition of Spain's government made it more difficult for that country to support its lenders, according to reports of international news agencies cited by the Bulgarian Telegraph Agency (BTA).

Moody's said the banks were also vulnerable to losses from Spain's busted real estate bubble.

On June 13, Moody's cut Spain's sovereign credit rating by three notches to just above junk status and placed it on review for a further downgrade.

The agency explained the move with the country's plans to borrow EUR 100 B from European Union rescue funds to recapitalize banks.

Spanish Economy Minister Luis de Guindos sent Monday a letter to Euro-group chairman Jean-Claude Juncker formally requesting "financial assistance" from the eurozone for its ailing banks

The eurozone vowed to allocate up to EUR 100 B for Spanish banks.

Meanwhile, the results of two independent audits requested by the Spanish government from U.S.-based consultancy Oliver Wyman and Germany's Roland Berger indicated that Spanish banks needed an estimated EUR 51 to EUR 62 B to withstand a worsening economy.

So far, four countries have resorted to EU-IMF rescue plans, including Greece, Ireland, Portugal and Spain.

Cyprus also announced Monday it had requested assistance from its eurozone partners, citing the negative impact of the Greek collapse.

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