If the Catalonia confrontation deteriorates further, it could create risks for Spanish banks, Fitch said Oct. 6.

The political risk after the Oct. 1 independence referendum has already raised financial market volatility. Bank bond credit spreads have widened.

Funding costs are protected from a temporary period of volatility because of the banks' active debt capital market transactions.

However, if investor confidence weakens for a sustained period, banks will issue more debt to rebuild minimum requirements for own funds and eligible liabilities buffers, prompting an increase in funding costs, Fitch said.

Fitch said Spanish banks are at "generally comfortable" liquidity positions, giving a cushion for deposit outflows. CaixaBank SA and Banco de Sabadell SA are more exposed compared to others because of their Catalan roots, Fitch added.

Both banks have already announced the transfer of their headquarters out of Catalonia, moves that will reduce deposit outflow risks, the rating agency said.

Fitch's central assumption is that Catalonia will remain part of Spain, and that political uncertainty will not significantly compromise economic growth prospects.