Bankia shares suspended ahead of expected €15bn bailout request
Shares in Spain’s fourth-biggest lender Bankia were suspended on the Madrid stock exchange on Friday, ahead of an evening announcement when the bank is expected to ask the state for a rescue of more than 15bn euros (£12bn).
The government is in the process of nationalising Bankia, which holds some 10 per cent of the country’s bank deposits, after it was unable to raise enough capital to cover heavy losses from loans to property developers during a building boom that crashed in 2007-2008.
Bankia and other banks exposed to the property bust are seen as a major risk for Spain and for the entire euro currency zone, because of concerns that the government will end up having to ask for international aid to prop up lenders.
Earlier this week Economy Minister Luis de Guindos told a congressional committee that the state would have to put at least nine billion euros into Bankia to cover losses on sour loans and repossessed housing.
The government has already spent 4.5bn euros to prop up Bankia and the entire rescue is now seen totalling some 20bn euros.
The figure has risen several times in recent months. Some weeks ago de Guindos pledged that no public money would be put into the banks.
Spain will have to go to the markets to raise debt to put into Bankia, at a time when its borrowing costs are high.
Money to rescue Spain’s savings banks, many of which were used by politicians to fund pet projects such as massive cultural centres and airports, is a sensitive subject at a time when the government is slashing spending on schools and hospitals to meet strict European deficit reduction targets.