Moody's: Spanish banks need more than stress test suggests

3 October 2012

Spanish banks are likely to require higher levels of assistance than was suggested in the independent stress test of the country's financial system.

That is according to a new report from Moody's Investors Service, which has indicated that the estimated capital shortfall of €53.7 billion ($69 billion) put forward by this investigation will be insufficient.

Indeed, the leading credit ratings agency noted that companies in the Spanish financial sector could need up to double this amount in order to restructure their balance sheets effectively as the eurozone debt crisis rumbles on.

Maria Jose Mori and Alberto Postigo, analysts at Moody's, noted: "The recapitalization amounts published by Spain are below what we estimate are needed for Spanish banks to maintain stability in our adverse and highly adverse scenarios."

Furthermore, the officials stated that if the markets remain sceptical about the outcome of the stress test, this could potentially undermine the government's attempts to restore confidence in the country's fiscal system.

By Asim Shah

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