Spanish bank ratings downgraded

Two leading credit rating agencies have downgraded some of Spain's largest banks, citing a deteriorating outlook for the Spanish economy.Standard & Poor's (S&P) said it was downgrading the ratings of 10 financial institutions, including the country's two biggest banks, Santander and BBVA.Fitch said it was cutting the ratings of six banks, after downgrading Spain last week.Ratings agencies have been downgrading European banks during the debt crisis.S&P said its latest action resulted from the "tougher-than-previously-anticipated macroeconomic and financial environment in Spain"."In our view, Spain's economy faces dimming growth prospects in the near term, real estate market activity remains depressed, and turbulence in the capital markets has heightened."It said banks would continue to be affected by imbalances in the Spanish economy for the next 15-18 months.Last Friday, Fitch said Spain's high underlying budget deficit and its fragile economic recovery made the country "especially vulnerable" to external shocks.S&P downgraded Banco Santander and Banco Bilbao Vizcaya Argentaria by one notch, to AA- from AA.Fitch also downgraded Santander one notch to AA-, and BBVA by one notch to A+.European banks, particularly those in France, have been downgraded due to concerns about exposure to highly-indebted countries.For example, the markets already expect banks to take a hit on Greek government bonds.European leaders are currently working on proposals to solve the debt crisis once and for all, and central to these plans is recapitalising the banks to ensure they can withstand any defaults on government debts.The third of the big three credit rating agencies, Moody's, downgraded 12 UK financial firms last week.However, it said the move reflected the fact it believed the UK government was less likely to bail out banks that got into trouble, and not a deterioration in the financial strength of the banking system.