MercoPress. South Atlantic News Agency

Spain top three banks left out of Moody downgrading of 30 institutions

Industry, Tourism and Trade minister: “most unfair to include Spain in the PIIGS bag”

Moody's risk ratings agency on Thursday downgraded the ratings of 30 Spanish banks, a direct consequence of its decision earlier this month to downgrade indebted Spain's sovereign rating.

Moody's said the latest downgrades reflected heightened financial pressures on Spain's sovereign credit and that of “many” weak banks, and decline of the importance of smaller banks amid rapid consolidation in the sector.

Another negative factor was the expectation of a weaker support for banks across Europe.

However Moody's left unchanged the ratings of Spain's three biggest banks: Santander, BBVA and La Caixa, listed as Criteria CaixCorp.

Of the 30 targeted banks which saw their debt and deposit activities downgraded 10 were pushed down by one notch, 15 banks by two notches and five banks by three or four notches.

“The outlook on most banks' senior debt and deposit ratings remains negative, reflecting the negative outlook on the sovereign rating and the negative outlook on banks' standalone credit profiles, given the challenging operating environment in Spain,” Moody's said.

On March 10 Moody's sliced Spain's long-term credit rating by a notch to “Aa2” and warned it may do so again, pounding financial markets as it raised the alarm over Spanish banking woes and spendthrift regions.

However in spite of Moody’s announcement earlier this week Federal Reserve Bank of Dallas President Richard W. Fisher said the markets are underestimating Spain’s ability to repay its debt.

“Spain has probably done more corrective surgery that people don’t realize,” the Fed regional bank chief told reporters after a speech organized by the American Academy in Berlin.

“It’s my personal opinion” that Spain is “doing a very good job and I think the market will come to realize that over time” said Fischer one of the most orthodox economists on the Federal Reserve board.

“I think Spain is going to surprise people and personally I am surprised it’s not priced into the market,” Fisher said. “I would not equate Spain to the situation in Greece or Portugal”.

Similarly Spain’s minister of Industry, Tourism and Trade complained in New York that it was “most unfair” to lump Spain with the Euro-zone weaklings such as Ireland, Greece and Portugal.

“The original sin of Europe was to consider Portugal, Italy, Ireland, Greece and Spain as a club” Miguel Sebastian said at Bloomberg’s Spain Investment Strategies conference in New York, in reference to the “PIIGS” acronym coined during last year’s Greek debt crisis.

Greece and Ireland have already been forced to accept punitive rescue packages from the European Union and Portugal, whose prime minister resigned Wednesday after lawmakers rejected yet another round of austerity – may soon have to follow suit.

The Spanish government, however, insists it will not need to turn to the EU for help.
Sebastian pointed out that Spain’s public debt as a proportion of GDP stood at 60% last year “well below the European average” of 84.1% of GDP.

The minister also cited an “historic” increase in Spanish exports, which soared 32% in January compared with the same month in 2010.