Spanish lender Bankia gained temporary approval for its state bailout, but Spanish authorities will need to present a restructuring plan within six months to offset this support, the European Commission said on Wednesday.
The EU executive said the state aid included a conversion of existing state-owned preference shares of 4.465bn euros into equity and a liquidity guarantee amounting to 19bn euros in favour of the Spanish BFA group and its Bankia unit.
"There is no doubt that the beneficiary will need to undergo deep restructuring," EU Competition Commissioner Joaquin Almunia, who regulates state aid, said in a statement.
"The conversion of preference shares into capital will simplify the ownership structure of BFA, which becomes fully State owned, thus making the necessary restructuring decisions easier to take."
Bankia's parent group asked for government help last month in Spain's biggest-ever bank rescue, in addition to state funds already put into the lender to cover possible losses on repossessed property, loans and investments.
The Commission said Wednesday's decision does not cover a BFA request for a further 19bn euro capital injection, as the Spanish authorities are still assessing that.
City A.M. Reporter