Santander has considerable operations throughout Latin America, including Brazil, the region's largest economy. Its exposure in emerging markets, many of which are growing, helps offset stagnation in developed economies.

The rating agency also cut Banco Bilbao Vizcaya Argentaria SA to Baa3 from A3 - just barely above junk status. Bankia, which asked for a bailout last month, slid all the way to speculative grade, down to Ba2 from Baa3.

Spain formally requested European aid for its indebted banks earlier on Monday, but the lack of details rekindled investor doubts about the financial sector.

Analysts say the euro zone's fourth largest economy, which has become the focus of the debt crisis, will struggle to get out of recession unless the banking problems are solved.

Moody's previously downgraded 16 Spanish banks in May.

Spain's banks are awash in bad loans after a real estate boom went bust.