Spanish banks need at least 40 billion euros in additional capital to guard against a possible further economic deterioration, the International Monetary Fund said in its report on Saturday.
The IMF made its estimate after conducting stress tests of Spanish banks.
“The findings indicate that while the core of the system appears resilient, vulnerabilities remain in some segments. Under the adverse scenario, the largest banks would be sufficiently capitalized to withstand further deterioration, while several banks would need to increase capital buffers by about 40 billion euros in aggregate to comply with the Basel III transition schedule (core tier 1 capital of 7 percent),” the report said.
Fitch ratings sharply downgraded Spain's credit rating on Friday, citing the growing banking crisis in the eurozone's fourth-biggest economy.
Spanish government debt was cut by three notches to BBB, above junk in Fitch's ranking scheme, and placed on a negative outlook, meaning the nation remained at risk of a further downgrade.
"The dramatic erosion of Spain's sovereign credit profile and ratings over the last year in part reflects policy missteps at the European level that, in Fitch's opinion, have aggravated the economic and financial challenges facing Spain as it seeks to rebalance and restructure the economy," Fitch said in a statement.
"The negative outlook primarily reflects the risks associated with a further worsening of the eurozone crisis, notably contagion from the ongoing Greek crisis," it added.
Fitch said the downgrade reflected higher than expected likely cost of restructuring Spain's troubled banking sector, which is now estimated to be around 60 billion euros ($75 billion), or as much as 100 billion euros "in a more severe stress scenario."
