Spain completes €9bn rescue of Bankia, but debt woes continue
SPAIN said yesterday its rescue of problem lender Bankia would cost at least €9bn (£7.2bn), while also saying that it is seeking ways to help its highly indebted regions meet huge refinancing needs.
The country’s weak banks and overspending regions are at the heart of the European debt crisis due to concerns that expensive bail-outs of ailing lenders and regions could force the country to seek international aid.
Losses at Bankia, Spain’s fourth largest bank, are central to investor fears that the fragile financial system could become more vulnerable as default rates rise in a recession.
Economy minister Luis de Guindos told a congressional committee that the state would have to put at least €9bn into saving Bankia, which he said would be fully nationalised in the process.
At the same time government sources said de Guindos and other top officials were at odds over how to help the country’s 17 autonomous regions refinance €36bn in debt that comes due this year.
Bankia’s new management team will undertake a complete assessment of the lender’s capital needs and will present its plan in mid-June, de Guindos said.The government will recapitalise Bankia’s parent group BFA using the state-backed bank restructuring fund, the FROB, and then will fund Bankia through a capital increase including preferential shares for existing shareholders.