May 27, 2012
It’s not looking good for the Spanish banking system. Standard & Poor’s just slashed the credit ratings of five banks and said the country is headed into a double-dip recession. One of them, Bankia, just asked the government for 19 billion euros in aid – a roughly $23.8 billion boost.
That makes it the largest bank bailout in Spain’s history. Combined with escalating concerns that Greece is about to execute its so-called Grexit from the euro currency, the news is doing nothing to alleviate the heightened anxiety in the euro zone.
Standard & Poor’s, which caused market shockwaves last summer when it downgraded U.S. debt, said the Spanish banking sector was vulnerable to turbulence in capital markets because it relies heavily on foreign funding.
The ratings agency dropped Bankia, Bankinter and Banco Popular Espanol into junk status, all with a BB+ score. Banca Civica and Bankia’s parent company, Baco Financiero y de Ahorros, also were lowered.