NEW YORK, NY -- (Marketwire) -- 06/14/12 -- Spanish bank stocks have been hit hard in 2012. Banco Santander S.A. and Banco Bilbao Vizcaya Argentaria S.A have both fallen over 20 percent year-to-date, and were recently downgraded two notches by Fitch Ratings. Moody's Investors Services has downgraded 16 Spanish banks in the last month. "Amidst the ongoing euro area debt crisis, the Spanish government's rising budget deficit and the renewed recession, sovereign creditworthiness has declined," the ratings agency said. The Paragon Report examines investing opportunities in the Foreign Banking Industry and provides equity research on Banco Santander, S.A. (NYSE: STD) and Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA).
Over the weekend the euro zone agreed to lend Spain up to $100 billion euros ($125 billion) to help bail out their banking system. Spain has stated it wanted aid for their banking system but wouldn't disclose the total amount until Oliver Wyman and Roland Berger, independent consultancies, gave their assessment of the country's banking system, which is expected before June 21. "The Spanish government declares its intention to request European financing for the recapitalization of the Spanish banks that need it," said Economy Minister Luis de Guindos at a news conference in Madrid.
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Spanish bond yields on Tuesday rose to their highest levels since the country began using the euro currency. This has increased speculation that Spain will need a full bailout of its own.
"It is quite likely that Spain needs a full bailout in the near future although policymakers will try all possible options to avoid this outcome, including a revival of bond purchases by the ECB as well as another three-year liquidity operation," said Pavan Wadhwa, JPMorgan's global head of interest rate strategy. "The concern is that the more peripheral debt the official sector holds, worries over subordination mean that the private sector will be less willing to lend to these countries," said Wadhwa.
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