Moody's downgrades 16 Spanish banks

Washington - Moody's on Thursday cut the debt ratings of 16 Spanish banks by one to three notches, citing the effects of the ongoing recession and the reduced creditworthiness of the Spanish government.

The action hit the leading bank, Santander, with a two-notch downgrade to A3, and the number-two bank, BBVA, was lowered by three steps to A3.

Two other large banks, Banesto and CaixaBank, were also cut to A3.

Moody's cited "renewed recession, the ongoing real estate crisis and persistent high levels of unemployment" as key to the ratings reduction.

It also blamed the "reduced creditworthiness of the Spanish sovereign, which weighs on banks' standalone profiles and affects the ability of the government to support banks".

Banks are suffering from the sharp deterioration of asset quality, with non-performing loans to real estate companies "increasing rapidly," the agency said.