S&P Downgrades Spain's Sovereign Debt Rating
Late last night, Standard & Poor's announced it was downgrading Spain's sovereign debt rating one notch from AA to AA-minus.
S&P's statement said that despite "resilience" in Spain's economy this year, there were "heightened risks to Spain's growth prospects" due to high unemployment, tighter financial conditions, a high level of debt and a broader eurozone slowdown.
The downgrade, published late on Thursday, comes amid uncertainty about how much extra capital will have to be raised by European banks to satisfy market concerns about the impact of fresh sovereign debt losses.
Spain's banks, of which Banco Santander and BBVA are among the largest in Europe by assets, mostly lack significant exposure to other peripheral European country debt but hold large portfolios of Spanish government bonds that would incur billions in losses if a so-called "hair cut" was imposed.
Fitch Ratings also downgraded Spain, last week. As CNN Money reports, S&P had taken negative action on Spanish banks earlier:
On Tuesday, the rating agency announced negative rating actions on 15 Spanish financial institutions, including prominent banks SpanishBanco Santander S.A. and Banco Bilbao Vizcaya Argentaria S.A.
Banco Santander's stock has plunged more than 20% year-to-date, while shares of Banco Bilbao Vizcaya Argentaria S.A. are down 11% from the start of the year.
S&P mentioned the Spanish economy's "dimming growth prospects" when it lowered credit ratings on 10 of the banks.
S&P's move took an immediate toll on Euro, which fell against the dollar. But the BBC reports that positive news from the G20 meeting of finance ministers buoyed the Euro later in the day.
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