Moody's downgrades its ratings of 28 banks in Spain

  • Follow Business

Moody’s Investor 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.

The announcement came on the same day Spain’s government formally asked for help from its European neighbors in cleaning up its stricken banking sector. However the request left many questions unanswered, including how much of a $125 billion loan package Spain would ask for.

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.

Spain formally asked the European Union on Monday for rescue loans to help clean up its troubled banking industry. The Spanish economy, the fourth-largest of the 17 countries that use the euro currency, is suffering from the aftershocks of a real estate bust that has devastated families as well as banks. Unemployment is nearly 25 percent.Spanish government officials haven’t said how much they will seek from the loan package offered by the EU June 9. Two international audits last week found that as much as $77 billion could be needed. Spain wants the loans to go directly to the banks so that the government wouldn’t be responsible for repayment. That idea has met with resistance, however.

The size and interest rates of the loans likely will be discussed at the EU summit this week.

Many analysts believe big banks, including those in the U.S., would be the first to feel the hit of a freeze-up in Europe’s financial system if Spain isn’t able to convince bond markets that it can rescue its hobbled banks.

The uncertainty pushed borrowing costs higher for Spain’s government. Its stock market plunged 3.7 percent.

OIL PRICES DROP

NEW YORK — The price of oil declined Monday as Spain’s banking crisis added to concerns about the troubled European economy.

A tropical storm also moved away from the heart of America’s oil production in the Gulf of Mexico, reducing the chances for a sustained disruption in U.S. supplies.

Benchmark U.S. crude fell by 55 cents to end the day at $79.21 per barrel in New York. At one point it had dropped to nearly $78 per barrel.

– Associated Press

Comments (2) Add comment
ADVISORY: Users are solely responsible for opinions they post here and for following agreed-upon rules of civility. Posts and comments do not reflect the views of this site. Posts and comments are automatically checked for inappropriate language, but readers might find some comments offensive or inaccurate. If you believe a comment violates our rules, click the "Flag as offensive" link below the comment.
avidreader
2947
Points
avidreader 06/26/12 - 11:30 am
0
0
Substitute the Name?

Concerning Spain's troubles, there is a possibility that we can eventually be reading a similar news report where the word, "Spain" will be substituted by "U.S."

It's definitely not out of the realm of possibility.

avidreader
2947
Points
avidreader 06/26/12 - 11:31 am
0
0
Substitute the Name?

Citizens, get out of debt NOW! "A hard rain's a gonna fall."

Back to Top

Top headlines

Election Updates

ATLANTA -- David Perdue squeaked to the lead in the Republican Senate runoff Tuesday over Jack Kingston in one of the most closely watched contests in the country.
Loading...