Moody's cuts Bankia in Spanish bank downgrade
Moody's Investors Service lowered its long-term credit rating Monday on Spanish banking conglomerate Bankia SA as part of a larger downgrade of 28 Spanish banks.
The rating agency says the weakening finances of Spain's government are making it more difficult for the country to support its lenders. Moody's also said the banks are vulnerable to losses from Spain's real estate meltdown.
Moody's lowered its long-term debt rating on Bankia two notches from "Baa3" to "Ba2", taking it from investment grade territory to junk status. All of Moody's ratings on the bank are under review.
However, the rating agency said the Spanish government's efforts to stabilize the banking system are a positive and it expects Bankia to receive rescue funds.
Bankia SA crumbled under the weight of bad real estate loans and was recently nationalized. It is one of several big banks that will need billions in rescue loans.
Moody's sweeping downgrade of Spain's bank came on the same day that Spain's government formally asked for help from its European neighbors in cleaning up its stricken banking sector. But the request left many questions unanswered, including how much of a $125 billion loan package Spain would request.
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.