Moody\'s on Thursday cut the debt ratings of 16 Spanish banks by one to three notches, citing the effects of the ongoing recession and the Spanish government\'s own reduced creditworthiness. The leading bank, Santander, and the number two BBVA, were both hit with three-notch downgrades from Aa3 previously to A3, which for Moody\'s is a upper-medium credit grade, with still low credit risk. Two other large banks, Banesto and CaixaBank, were also cut to A3. Not included in the ratings review was the fourth largest bank Bankia, which the government intervened to prop up on May 9, taking a 45 percent stake. On Thursday Bankia fought off rumors it was hit with a run on deposits, as nervousness around the eurozone grew over the entire Spanish banking sector. In the downgrades, Moody\'s cited \"renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment\" as key to the ratings reduction. It also blamed the reduced creditworthiness of the Spanish government, \"which weighs on banks\' stand-alone profiles and affects the ability of the government to support banks.\" Banks are suffering from the sharp deterioration of asset quality, with non-performing loans to real-estate companies \"increasing rapidly,\" the agency said. Moody\'s said it recognized some positive trends which limited the downgrades, including the some improvement in the banks\' capital strengths, liquidity support from the European Central Bank, and support from Madrid. \"However, Moody\'s believes these positive factors are overwhelmed by mounting asset-quality challenges that weaken the earnings and threaten to erode the capital positions of many banks.\" Also cut was Santander\'s British subsidiary, Santander UK, falling from A1 to A2, still one level higher than its parent. Moody\'s explained that Santander UK \"continues to benefit... from UK systemic support given its nationwide network; its important role in the UK payments system; and its large market shares in UK deposits and loans.\" \"Santander UK has no direct exposure to the Spanish government (or regional governments),\" Moody\'s said. It added that as a \"systemically important bank in the UK,\" British authorities would not likely allow the subsidiary to be weakened to support its parent. Earlier Thursday Moody\'s downgraded the credit of four Spanish regional authorities, warning they would likely miss their deficit-reduction targets. It said it cut the credit rating for Catalonia, Murcia, Andalusia and Extremadura \"due to their poor fiscal performance in 2011 and the low probability that the regional governments will be able to meet the 2012 deficit target.\"