Ratings agency Moody's has cut the credit ratings of 16 Spanish banks, a further blow to a country that is struggling to deal with the bad debts of its banking sector.

It also cut the debt rating on Santander UK, a subsidiary of the Spanish banking giant.
It comes after shares in struggling lender Bankia fell another 14%. They have almost halved in value this month.
Fears about losses at Spanish banks have hit shares across Europe.

The banks include Banco Santander and BBVA, the biggest banks in Spain. Ten of the 17 banks were also put on negative credit watch, meaning that further downgrades are possible.

"The change to Moody's credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth," Andy Smith, a spokesman at Santander said about the downgrade.

"Santander UK plc is an autonomous subsidiary of the Santander Group, with more than 90% of its total assets held in the UK and a eurozone sovereign exposure of less than 1% of assets."

In cutting the ratings, Moody's cited the "adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment".

It also said that the Spanish government, due to its borrowing difficulties, has had its ability to provide support to the banks "reduced".

The Spanish government also had to pay higher rates of interest to borrow money on the markets, which leads some to believe it will need a bailout.

Moody's also cut the ratings of four of Spain's regions - Catalonia, Murcia, Andalucia and Extremadura - of whom it said there is only a "low probability that the regional governments will be able to meet the 2012 deficit target".