Moody's downgrades troubled Spanish savings bank CAM
Moody's downgraded the credit ratings of Spain's Caja Mediterraneo (CAM) by two notches on Tuesday, saying its recapitalisation plan may fall short of what is needed.
Earlier this month, the bank said it would seek 2.8 billion euros ($4 billion) in funds from the FROB state-backed bank restructuring fund in order to meet tough new capital requirements set by the government.
Moody's said it believed the amount "may not sufficiently protect CAM against a more conservative loss scenario (given) ... Spain's uncertain economic outlook and the uncertainties within the real-estate sector.
"Furthermore, Moody's expects that internal capital generation from recurrent sources may be limited by the very challenging domestic operating environment of subdued growth, downward margin pressures and ongoing provision requirements," it said in a statement.
As a result, the ratings agency cut its ratings of CAM's senior debt and deposits ratings to Ba1 from Baa2.
Another ratings agency, Fitch, on April 1 cut CAM's long term debt rating to BB+ from BBB+.
Spain's lenders, especially its regional savings banks which account for about half of all lending in the country, have been heavily exposed to bad debt since the collapse of the property sector at the end of 2008.
The savings banks are at the heart of market fears that Spain will follow Greece, Ireland and Portugal in seeking a bailout from the European Union and the International Monetary Fund but Madrid insists it can solve their problems alone.
© 2011 AFP