Spain's Bankia to receive some rescue funds shortly: source

Thu Aug 16, 2012 1:11pm EDT
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By Carlos Ruano

MADRID (Reuters) - Spain's Bankia (BKIA.MC: Quote), a large lender taken over by the state in May, will soon receive part of a promised 19 billion euros ($23.5 billion) capital injection via a European rescue, a spokeswoman for the economy ministry said on Thursday.

"The funds will be received shortly," the spokeswoman said.

The government pledged 19 billion euros in aid for Bankia, which is heavily exposed to Spain's imploded property market, when it took it over. Just weeks later, in June, the country asked Europe for up to 100 billion euros in aid for all of its troubled banks.

The spokeswoman said the government continues to negotiate with Brussels regarding how it may be able to compensate small investors who will be forced to take losses in their investments in Bankia and other banks that may receive rescue funds.

Spain's government is scheduled on August 24 to pass a series of laws to comply with conditions of the European rescue, including forming a "bad bank" that will take on toxic property assets from the banks, in order to sell them off.

As he tries to bring down Spain's high borrowing costs and avoid an international bailout like Greece, Portugal and Ireland, Prime Minister Mariano Rajoy has taken steps to clean up the country's banks and control spending by regional governments.

Before Spain has met all the conditions for aid for its banks, Europe has already made available 30 billion euros in emergency funds for the country's nationalized banks - Bankia, Catalunya Caixa, NovaGalicia and Banco de Valencia - but Spain has not formally requested specific aid up until now.

That means Spain can get urgent funds even while it works out the fine print with Brussels regarding the losses investors will have to take in rescued banks.   Continued...

A Spanish flag flies next to the headquarters of Bankia bank in Madrid July 24, 2012. REUTERS/Susana Vera