The strain is being felt particularly in Spain's system of local savings banks, which generate roughly half of the country's lending and deposit-taking. Moody's Investors Service last week moved to slash ratings on five large and medium-size Spanish savings banks, including Caja de Ahorros del Mediterráneo, citing a "the rapid deterioration in asset-quality indicators."
Research firm Keefe, Bruyette & Woods Ltd. notes concerns about commercial banks Banco Popular and Banco de Sabadell, in part due to their loan portfolios; real estate and construction account for almost 20% of the banks’ loan portfolios.
The country’s financial difficulties are not being felt in Spain alone. Last week, British banking company Barclays PLC’s 35% decline in first-half net income included impairment charges of £103 million ($197.7 million) in its Western European retail and commercial business to help cover losses tied to Spain's property and construction markets.