Moody's downgrades ratings of 28 Spanish banks

NEW YORK  - Moody's on Monday downgraded 28 Spanish banks' long-term debt and deposit ratings by one to four notches.  

Moody's said in a statement that the downgrade followed the weakening of the Spanish government's creditworthiness, as captured by Moody's downgrade of Spain's government bond ratings to Baa3 from A3 on June 13, 2012, and the initiation of a review for further downgrade.

The rating agency added that the downgrades of the long-term debt and deposit ratings also reflect the lowering of most of these banks' standalone credit assessments.

According to the statement, Moody's has also downgraded the ratings for senior subordinated debt and hybrid instruments of affected entities; all rated government-backed debt issuances from Spanish banks; and the long-term debt ratings of Instituto de Credito Oficial (ICO), which are based on an unconditional and irrevocable guarantee from the Spanish Government.

The downgrade came after Moody's cut 15 of world's biggest banks after the markets closed on Thursday. However, investors thought it was somehow too late and had already priced in by the market. All bank shares went up on the next trading day.  

The current credit actions are also part of a comprehensive review of the overall global banking system by Moody's. In mid- May, Moody's cut credit ratings of Italian, Spanish, German and Austrian banks.