Spain's banks are healthier than financial markets believe because they have already made provisions for three quarters of the bad debt on their books, Moody's Investors Service said on Tuesday.

"As long as the ECB provides the funding to keep the cost down ... the Spanish banking system is not as bad as the current market seems to believe," Johannes Wassenberg, managing director of Moody's financial institutions group told reporters.

Moody's estimated Spanish banks have 108 billion euros ($133 billion) in bad debt of which 75 percent have been provided for by the banks.