Credit rating agency, Moody's Investors Service, cut the long-term debt and deposit ratings of 28 Spanish banks on Monday including Banco Santander and Banco Bilbao Vizcaya Argentaria.

The downgrade came just a week after the country formally sought a bailout for its banks.

The rating agency cited the reduced credit worthiness of Spanish government bonds and the banks' links to sovereign debt along with the its sour real estate loans as the reasons for the downgrade.

It also believes the exposure of the Spanish banks to the commercial real estate (CRE) is likely to cause higher losses which might force these banks to seek external support.

Moody's cut Banco Santander's long-term rating to Baa2 from A3, one notch above Spain's sovereign rating. The rating agency also cut the credit worthiness of Banco Bilbao Vizcaya Argentaria from A3 to Baa3, just above junk status.

The credit assessment agency placed Banco Santander and Santander Consumer Finance one notch above the sovereign's rating citing "high degree of geographical diversification of their balance sheet and income sources, and a manageable level of direct exposure to Spanish sovereign debt relative to their tier 1 capital, including under stress scenarios".

Bankia, which requested a €19bn ($24bn, £15bn) rescue from the Madrid government on 26 May, is down from Baa3 to Ba2.

The latest action on the part of the Moody's followed its downgrade of the Spain government's bond rating from A3 to Baa3, just above junk status on 13 June.

Moody's cut the ratings of nearly a dozen Spanish banks to junk status. The rating agency downgraded three banks to one notch lower, 11 banks by two notches, ten banks by three notches and six banks by four notches.

It has also downgraded the short-term ratings of 19 banks between one to two notches.

Moody's earlier downgraded 16 Spanish banks on 17 May. Moody's also downgraded 15 top global banks on 21 June citing "significant exposure to the volatility and risk of outsized losses inherent to capital markets activities".