Standard & Poor's cut its credit ratings on Banco Santander and Banco Bilbao Vizcaya Argentaria, Spain's biggest lenders, along with nine other banks after lowering the country's sovereign rating.
The ratings company said in a statement yesterday it lowered Santander's long-term counterparty credit rating two levels to BBB with a negative outlook, from A-minus.
It also is cutting the short-term ratings on four banks and placing the ratings for six banks on creditwatch negative.
S&P will continue reviewing the sovereign downgrade's implications, and plans to conclude the process next month.
Last week's reduction of Spain's ratings to BBB-minus/A-3 affected the assessment of lenders that were ranked higher than the country and those whose ratings assumed government support, it said.
"For Santander and BBVA, we don't anticipate that we would lower" the banks' stand-alone credit profiles by more than two levels, if at all, after the review, S&P said.
"The possibility that our long-term ratings on these banks would be affected is therefore remote."
Spain's debt rating was cut to one level above junk by S&P, which cited euro-region peers' backtracking on a pledge to sever the link between the sovereign and its banks as it considers a second bailout. The downgrade came after Spain announced a fifth austerity package in less than a year and published details about stress tests of its banks.
Creditworthiness concerns have grown since the government requested as much as €100 billion (HK$1 trillion) in European Union aid in June to shore up its lenders.
Separately, the Portuguese government pushed ahead on Monday with a draft budget for next year that includes massive tax rises and spending cuts, just two days after mass street protests against further austerity.
"The proposed budget is the only one possible … we don't have any room for manoeuvre," Finance Minister Vitor Gaspar said after submitting the budget bill to lawmakers.
The new measures, a condition of debt-rescue funding, include a 4 per cent surtax and a reduction in pensions and social benefits. The average tax rate is set to rise to 13.2 per cent from 9.8 per cent.