Moody’s today slashed its ratings on 28 Spanish banks, just hours after Madrid formally asked the European Union for a bailout of up to 100 billion euros ($125 billion) for its stricken lenders, the Associated Press reported.
More from GlobalPost: Spain formally applies for a bank bailout of up to EUR100BN
The action marked another blow to Spain and its troubled banking sector, which have been downgraded by the world’s major ratings agencies several times in recent months.
Earlier this month, Moody’s cut Spain’s sovereign credit rating by three notches to just above junk status and placed it on review for a further downgrade.
After years of reckless lending, the country’s banking sector is now struggling to deal with billions of euros of toxic debt and assets resulting from the collapse of the country’s property market four years ago.
Moody’s said the ratings action reflected the weakened finances of the Spanish government – the economy has relapsed into recession, unemployment is nearly 25 percent and Madrid will have to repay the EU loan — which have reduced its ability to support the banking sector, according to Reuters.
It also reflects Moody’s expectation that losses from the commercial property market will continue to rise, Bloomberg added, citing a statement from Moody’s.
But it wasn’t all doom and gloom.
Moody’s said it “views positively the broad based support measures” being introduced by Madrid to support the severely weakened banking system.