MADRID--Moody's Investors Service is cutting its credit ratings on 28 Spanish banks, saying the weakening financial condition of Spain's government is making it more difficult for that country to support its lenders.
Moody's also said the banks are vulnerable to losses from Spain's busted real estate bubble.
The announcement from Moody's came on the same day that Spain's government formally asked for help from its European neighbors in cleaning up its stricken banking sector. The request left many questions unanswered, including how much of a $125 billion loan package Spain would request.
That uncertainty led to losses Monday in stock markets in the Europe and the U.S. Bond investors pushed Spain's borrowing costs higher, a signs of lagging confidence in the country's ability to support its banks.
The downgrades are a measure of Moody's view on the ability of the 28 banks to repay their debts. Moody's said the downgrades stemmed from its lowering of Spain's credit rating by three notches earlier this month.
A downgrade usually means that banks will have to pay more for their debt. Investors demand higher interest for riskier debt, which is what the downgrades represent. (AP/T05/TW)