Spain injects capital into Bankia as Andalucia asks for a bailout

Ben Southwood
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SPAIN’S BANK rescue fund last night approved a capital injection into embattled lender Bankia.

The bailout from the Fund for Orderly Bank Restructuring (FROB) will go ahead following approval from the Bank of Spain and the government.

And Spain may also need to bail out Andalucia, which became the latest region to request emergency funding yesterday, asking for a state loan of €1bn (£792m).

FROB will pump €4.5bn into beleaguered Bankia, which reported a €4.4bn loss on Friday, in order to drive its core capital up towards the stringent levels required by the Spanish bailout plan. On Friday, Bankia recorded a 6.3 per cent core capital ratio, well below the nine per cent it will need to attain by the end of the year – and its parent company BFA had just 1.8 per cent.

A source had told Reuters that the troubled lender would receive the funds by 14 September – but economic tsar Luis de Guindos yesterday said the bank would receive the funds through the night.

Despite these pressures, the de Guindos said yesterday that the fourth largest Eurozone economy was committed to meeting its deficit target for 2012. The country has already borrowed an extra 4.6 per cent of GDP this year – out of a total 6.3 per cent allowed by its target – but the minister assured radio listeners the goal would be met.

“The commitment of the government to meet the 6.3 per cent target is very high,” de Guindos said on a Spanish radio station. “It is our number one priority when it comes to our economic policy.”