LONDON, England - October 11, 2011 - Standard & Poor’s Tuesday downgraded 10 Spanish banks by one notch, including giants Santander and BBVA, warning that the country’s banking sector will further deteriorate in the next 15 to 18 months.

The outlook on all Spanish financial institutions S&P rates is now negative, reflecting the possibility of further downgrades if the economy slows down more than anticipated.

The agency, which rates Spain at AA-minus with a negative outlook, forecast the level of troubled assets in the country’s banking system will continue to rise throughout 2012 and possibly into early 2013 given a sluggish real estate sector.

“In our view, Spain’s economy faces dimming growth prospects in the near term, real estate market activity remains depressed and turbulence in the capital markets has heightened,” S&P said in a statement.