Photo: Fotos_von_Carlos on Flickr
If you live in the U.S., then you probably missed one of the biggest headlines out this morning:Standard & Poor’s ratings agency took negative actions on 16 Spanish banks—downgrading 11 of them—following a sovereign downgrade last week to BBB+.
Here are the big changes:
Santander: A+ to A-
Banesto: A+ to A-
Santander Consumer Finance: A to BBB+
BBVA: A to BBB+
Banco Sabadell: BBB- to BB+
Ibercaja Banco: BBB to BBB-
Kutxabank: BBB to BBB+
Banca Civica: BBB- to BB+
Bankinter: BBB to BBB-
Confederación Española de Cajas de Ahorros (CECA): BBB to BBB-
BBSA: A to BBB+
La Caixa: BBB- (placed on creditwatch negative)
CaixaBank: BBB+ (placed on creditwatch negative)
Bankia: BBB- (placed on creditwatch negative)
Banco Financiero y de Ahorros S.A. (BFA): BB- (placed on creditwatch negative)
Banco Popular Espanol: BBB- (to remain on creditwatch negative)
S&P acknowledged that these ratings actions were virtually automatic in the wake of last week’s sovereign downgrade.
The ratings agency also hinted that increased exposure to Spanish government debt could be hurting the ratings of these banks, in particular Banco Santander. This may be a veiled suggestion that the European Central Bank’s two three-year long-term refinancing operations—which had the effect of giving banks cheap money to buy Spanish sovereign debt and tied their solvency more closely to that of the sovereign—may not have been such positive developments after all:
Santander and some of its core and highly strategic subsidiaries, which we rate one notch above the sovereign, and BBVA, and BBSA, which we rate at the same level as the long-term sovereign rating on Spain. We seldom rate financial institutions above the foreign currency rating on the country where the institution is domiciled and, in these occasions, the maximum notching differential according to our criteria is limited to one notch unless the sovereign rating is ‘B-‘ or lower, reflecting our view of the interconnection between a banking system and the related sovereign.