CREDIT RATING AGENCY Moody’s has downgraded 16 Spanish banks amid fears over the country’s economic prospects.

The banks were downgraded by up to three points, a move that the agency said was down to economic difficulties in Spain and “the ongoing euro-area debt crisis”.

The outlook for ten of the banks downgraded remains “negative”, the agency said. It also downgraded Santander UK, a UK-based subsidiary of the Spanish banking giant.

Moody’s picked out several key areas which it said had led it it to reassess the banks’ prospects. They included a “renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment” in Spain.

It also raised concerns about the “creditworthiness of the Spanish sovereign, which [...] affects the ability of the government to support banks.”

There are fears that Spain could be left extremely vulnerable if Greece’s ongoing problems force it to leave the eurozone. Spain’s economy is so large that current EU and ECB stability funds may not be sufficient to bail it out.

There were reports in Spain – later denied by the country’s government – that €1billion in deposits had been pulled from the lender Bankia in the last week. Shares in Bankia dropped 30 per cent, BusinessWeek reports.

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