Santander’s head of UK banking has moved to reassure Birmingham business leaders that their money is safe amid fears of a run on Spanish banks.

Spanish stocks dropped sharply after ratings agency Moody’s downgraded its credit score of 16 Spanish banks –including Santander UK – in the latest blow to the troubled financial sector.

But the move to an A2 rating was accompanied by reassurances over its separation from the parent institution in Spain.

Rating it one notch higher than the parent was appropriate given its “general funding independence” from Banco Santander, the fact that it was “a systemically important bank in the UK” and that it had “no direct exposure to the Spanish government (or regional governments)”.

“Moody’s believes there is a low likelihood that the FSA would allow Santander UK to substantially weaken itself in order to support the parent,” it concluded.

Steve Pateman, head of UK Banking at Santander UK, was guest speaker at a CBI senior executives lunch in Great Barr on May 17.

“Santander is sufficiently ringfenced,” he said.

“Santander runs its global business on a subsidiary model. This is different from the way a lot of banks operate.

“Santander invests about £12 billion in the UK, entirely UK assets. We have virtually no exposure outside the UK.

“We have £170 billion in residential mortgages and £30 billion to small business. We are primarily exposed to the UK economy.

“If Spain wanted to take money out of the UK it could only do so by a dividend.

“It can only declare a dividend if we make a profit and have sufficient deposits.

“It would have to be approved by the FSA. They would only allow a dividend if we were above the capital liquidity rates.

“It is unlikely that the board would agree a dividend that would breach those rates.”

Kent County Council has suspended its use of Santander UK for overnight deposits, Havering Council removed Santander from its approved list in February and Westminster City Council said it had moved £10m from the bank 18 months ago.

“When there is so much noise and uncertainty around Europe and a number of those councils had their money in Iceland, I understand their concerns,” Mr Pateman said.