Fitch cuts rating for Spanish savings bank association

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Fitch ratings agency cut the credit standing of a Spanish savings bank association by one notch Thursday and warned it could lower it further due to the weak prospects for the sector.

The agency cut its rating for the Spanish Confederation of Savings Banks (CECA) to "A" from "A+" with a negative outlook, saying the body was "operating in a weak economic environment with muted growth prospects."

"The rating actions reflect CECA's main counterparties' higher risk profiles, the transformed Spanish savings banks, now 18 in number, most of which have converted to bank status but remain associated members of CECA," Fitch said in a statement.

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 government and Bank of Spain have forced a wave of consolidation in the sector this year and are requiring banks to quickly increase the proportion of core capital they hold to above international norms.

© 2011 AFP

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