Spain’s Ministry of Finance has confirmed the government is to mount a rescue of the country’s fourth largest lender with a partial nationalisation of the BFA-Bankia group.
It is part of Prime Minister Mariano Rajoy’s attempt to shore up Spain’s banking sector to restore trust in the financial system without overburdening public finances.
The operation will be carried out by converting a previous 4.5 billion euro rescue loan into shares giving the government a controlling interest.
On Friday Madrid will unveil a wider plan to clean up banks exposed to the property and construction sector crashes. Many of them have sustained huge losses, among them Bankia which has taken the biggest hit.
Spanish bank shares plunged on Wednesday at the prospect of the government forcing lenders to set aside a further 35 billion euros against loans to the moribund building sector on top of 54 billion already being held.