Standard & Poor (S&P)'s rating agency cut the credit ratings of seven Spanish banks including the two largest, Santander and BBVA, after having downgraded Spain's sovereign debt. Banks that suffered in the downgrade late on Tuesday were Santander, BBVA, Banesto, Banco Popular, Bankia-BFA, Banco Sabadell and CaixaBank, the New York-based rating agency said in a statement. S&P's axed Spain's sovereign credit rating by two notches on October 10, leaving its bonds just one level above speculative, or junk-bond, status. Rival agency Moody's Investors Service already has Spain's debt on a similar rating and is expected to announce this month whether it will cut the rating again, assessing Spanish bonds as junk. Such a move could send Spanish borrowing rates spiralling and rapidly force the country to seek a sovereign bailout. S&P's downgraded the debt of Santander and its Banesto subsidiary by two notches to BBB from A- and BBVA by two notches to BBB- from BBB+. Both banks had a negative outlook, meaning they could be downgraded in the medium term. Others lost one notch, such as Banco Popular, which was cut to BB from BB+; Bankia, which fell to BB from BB+; Bankia parent BFA, sliced to B from B+; CaixaBank lowered to BBB- from BBB; and Banco Sabadell dropped to BB from BB+. "The sovereign downgrade has direct negative rating implications on those banks that we rated higher than the BBB- long-term rating on Spain, and on all banks where we factored extraordinary government support into the ratings," S&P said. "Our two-notch downgrade of Spain to 'BBB-' and the factors behind it will likely affect our view of the Spanish banking sector's economic and/or industry risks," the agency added.