Moody's one-notch downgrade of Spain's sovereign credit rating, from Aa1 to Aa2, is a blow to the bankers rushing to prepare initial public offerings for the Spanish savings banks known as cajas.

The credit ratings agency believes the cost to recapitalise the beleaguered caja sector, hit by the collapse of the domestic real estate market, could reach €110-120 billion in a worst-case scenario -- substantially above the €20bn maximum forecast by the government and the central bank.