MADRID (AFP) ― Fitch Ratings and Standard & Poor’s on Monday lowered their credit rating of Spanish banks, including the country’s four largest lenders, following their downgrade of Spain last month.

Fitch cut its rating for Santander, the biggest eurozone bank by market capitalisation, by two notches to “A” and cut its ratings for BBVA, Bankia and CaixaBank by one notch.

Standard & Poor’s cut its rating for the banks ― Spain’s four biggest ― as well as for 11 other Spanish lenders.

The agency lowered its credit ratings on 10 banks by one notch and it cut its rating on another five by two notches.

“The downgrade of Spain indicates a weakening of its ability to support its largest banks,” Fitch said in a statement.

“Fitch believes there is a close link between bank and sovereign credit risk (and therefore ratings) and, it is unusual for banks to be rated above their domestic sovereigns.

“Banks tend to own large portfolios of domestic sovereign debt and are highly exposed to domestic counterparties, meaning profitability and asset quality are vulnerable to adverse macroeconomic and market trends.

“Funding access, stability and cost for domestic banks are also often closely linked to broad perceptions of sovereign risk,” the agency added.

Spain’s banking sector is weighed down by a mountain of soured loans and property assets that are losing their value after the bursting of the property bubble, which coincided with the start of a global downturn in 2008.

According to the Bank of Spain, the sector had 176 billion euros ($232 billion) in problem loans and seized real estate in June 2011 ― a figure which has probably increased since, as the economy has weakened.

“We expect the Spanish banking system’s profitability to remain below its historical average over the medium term as banks continue to operate in an unfavorable economic and financial environment” Standard & Poor’s said in a statement.

Fitch predicted Monday that Spanish banks will continue to operate in tough economic times.

“Fitch expects no GDP growth for Spain in 2012 and 1.0 percent growth 2013, for unemployment to remain high at around 23 percent and for the real estate market to remain a long-term cause for concern,” the agency said.

The banking sector has undergone a major restructuring since 2008 but Spain’s new conservative government considers it still at risk.

Earlier this month the government launched a major clean-up of the country’s troubled banks, approving a law that obliges them to set up a financial safety net totaling 50 billion euros.

Under the reform the level of provisions must increase to 80 percent of the total value of assets for some troubled banks and a general provision requirement of 7.0 percent will be imposed on others.

Standard & Poor’s downgraded the debt of Spain by two notches to “A” from “AA-” on Jan. 13 as part of a slew of downgrades of eurozone countries.

Two weeks later Fitch downgraded the debt of Spain and four other eurozone countries due to the deteriorating economic outlook in Europe and concerns that European leaders are not acting boldly enough to prevent the debt crisis from worsening.