What happens if they lowered you the rating to your bank

The stock exchange of Spain felt the effects of the reduction of Moody´s

Spain returned to grab headlines this Friday, in the context of the crisis in the eurozone, after that Moody's risk agency reduce the rating 16 banks in this country, some of them, as the Santander and BBVA with a significant presence in Latin America.

Other 26 Italian banks also were "degraded" by the same agency this week.

European financial markets lived a day of nervousness, with ups and downs constant before the fears that the Spanish figures being added to a mixture already loaded by the political uncertainty in Greece.

Amid rumors that deposits, Íñigo Fernández of Mesa, leaks were occurring Spanish Treasury spokesman, told the BBC that the country is not facing a liquidity problem nor is managing the possibility of a run on banks.

But, what implications does this situation of volatility for the Bank's clients? And what impact is the verdict of the rating as Moody´s on a country's financial performance?

The work of agencies rating as Moody´s is to establish the quality or "risk" posed by investing in certain institutions, depending on the liquidity of the company, the economic environment in which plays and the situation regulatory of the country, among other factors, said Secretary of the Spanish Institute of financial analysts, Javier Méndez Llera.

"It's like a note that you put a professor in a course, so to speak." It may be that in a half serves one, and the next a B or a C. "Depending on the circumstances, going down or raising this rating", he said.

According to Méndez Llera, there is no direct effect on savers or common creditors, that make up the "retail" Bank.

The cut in the rating, on the other hand, has an effect on the "wholesale market", which comprise the institutional investors, such as insurance companies or funds of investment, among others. "When they lowered you the rating, the interest rate that you are paying (in this market) has to be higher, because it is understood that you have a little more risk, then the market asks for a higher interest rate," notes.

Instead, the fees that banks pay to its savers, as well as which charged you to their creditor retailers (through loans for purchase of housing, for example) are linked to other factors, which have to do with market rates and profit margins.

However, an independent effect has to do with the "psychological" of this type of sales impact.

"With this message, arises a problem of lower confidence of investors in banking." "This is dangerous for the financial system," indicates the spokesman of the Spanish organization consumers in action (Facu), Rubén Sánchez.

But as Méndez Llera, Sanchez considered that "we have no elements to consider that there may be a prejudice in the short term".

The situation of the banks has provoked some protests in Spain

Distrust is a classic catalyst for bank runs, which occur when depositors massively withdraw their money from financial institutions for fear of a bankruptcy or closure perceived imminent.

This week, thousands of people took out their savings of Bankia, a bank in trouble nationalized by the Spanish State.

For now, the sources do not see grounds to believe that the situation can be generalized. For Sanchez, in the case of Bankia not operated concern both the "outrage, with a bank that has executives that have enriched during the crisis of the entity".

For Méndez Llera, "the probability that a bullfight occurs is very low."

"A situation like this is exceptionally dangerous for any economy," he says. "It would be very serious", adds, for its part, Rubén Sánchez, who complains that in the Spanish case "there is no transparency towards citizens the Government" about the State of the financial sector or their plans for the nationalized Bank.

The bankruptcy means the activation of a process that usually begins with the nationalization of the Bank. "Will that be transient if, in line with the liberal thought, one thinks in his return to the private sector in the future, either by absorption, merger or sale", said Javier Méndez Llera.

While these mechanisms come into operation, there is a system of protection to the ahorrista, by which your money is guaranteed up to a maximum amount, which in the Spanish case is 100,000 euros (about US$ 127,000), in line with regulations of the European Union.

"Realistically, this Fund exists to small banks." There "is no money for the millions of customers of big banks recover their funds", believes Rubén Sánchez.

But for Méndez Llera, must be taken into account that after the Spanish State, "it is the supranational situation".

"Until now there has been loss of a single euro for a Greek depositor, and the situation of Greece is that", he recalls.

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