The global financial and economic crisis has had an adverse effect on a huge number of people and businesses. It hasn't just been small businesses which have been affected either as even major banks have come up against problems and scrutiny. This is largely because of their contribution to the financial crisis but also because a lot of country's governments are no longer able to or want to support banks as they previously did.
Spain's Banco Santander is one of the most recent banks to feel the effects as the bank's credit rating has now been downgraded. There are various reasons for this downgrade but one of the main ones is that the Spanish government is also struggling greatly and should the bank run into major problems, it is unlikely that the government will be in a position to help the bank. Without that support the bank would almost certainly go under and that could be catastrophic.
The downgrade has also come because of various other factors which could have a severely adverse effect on the bank. Spain is now in a renewed recession with unemployment levels also at a very high level. This means that there is a good chance of people trying to seek credit which could place the bank in a difficult decision. The downgrade means that the bank will have to be more careful when lending money.
The Spanish sovereign has also had its creditworthiness reduced and this affects the government considerably. It means that the government will not be able to support the banks anymore. Spain is also facing a real-estate crisis which means properties bought with loans from Spanish banks are not holding their value. If borrowers were to default on their loans, banks would not be reclaiming quality assets and could potentially lose out on their loans.
Overall the downgrade has come because of the many potential pitfalls which Banco Santander is currently facing and the little chance of a bail out should the company fall victim to one of these pitfalls. The downgrade has not been put in place to damage the bank but instead to try and safeguard it, protect its future and prevent a major financial breakdown in Spain.
Spain's Banco Santander is one of the most recent banks to feel the effects as the bank's credit rating has now been downgraded. There are various reasons for this downgrade but one of the main ones is that the Spanish government is also struggling greatly and should the bank run into major problems, it is unlikely that the government will be in a position to help the bank. Without that support the bank would almost certainly go under and that could be catastrophic.
The downgrade has also come because of various other factors which could have a severely adverse effect on the bank. Spain is now in a renewed recession with unemployment levels also at a very high level. This means that there is a good chance of people trying to seek credit which could place the bank in a difficult decision. The downgrade means that the bank will have to be more careful when lending money.
The Spanish sovereign has also had its creditworthiness reduced and this affects the government considerably. It means that the government will not be able to support the banks anymore. Spain is also facing a real-estate crisis which means properties bought with loans from Spanish banks are not holding their value. If borrowers were to default on their loans, banks would not be reclaiming quality assets and could potentially lose out on their loans.
Overall the downgrade has come because of the many potential pitfalls which Banco Santander is currently facing and the little chance of a bail out should the company fall victim to one of these pitfalls. The downgrade has not been put in place to damage the bank but instead to try and safeguard it, protect its future and prevent a major financial breakdown in Spain.
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